McColl’s blames Covid-19 and supply chain disruption for falling sales and profits

In a trading update for the 52 weeks to November 28, 2021, McColl’s said it expected adjusted EBITDA to be between £20m and £22m while total full-year revenue fell 11.2% to £1.11bn. 

The c-store retailer put the decline in revenues down to “supply chain disruption in the second half” of the period and the conclusion of its “store optimisation programme”. 

The retailer also said that top line growth had been hampered in the fourth quarter by “industry-wide availability issues across the estate”, with one-year like-for-like revenues in the period down by 5% as a result.

Like-for-like sales declined 3.3% compared to last year, but on a two-year basis, McColl’s reported like-for-like sales increase of 9.1%. 

McColl’s said that its “lending banks remain supportive with ongoing discussions towards an agreement for FY22 and the balance of the facility”, which it expected to announce in March 2022. 

At the end of the period, McColl’s will have 185 Morrisons Daily stores trading across its estate, having increased its target to 450 stores by the end of 2022 full year. 

McColl’s said Morrisons Daily stores converted in the second half of the year delivered 24.8% 2-year like-for-like sales growth despite availability issues, “with significant upside opportunity”.

By this time next year, McColl’s said the 450 Morrisons Daily stores will be generating over half of the retailer’s total sales and “will fundamentally re-shape the business”.

The c-store operator also rolled out a delivery partnership with Uber Eats to 400 of its stores across the estate. The retailer divested 100 stores during the year, leaving it with a full estate of 1,165. 

Chief executive Jonathan Miller said: “FY21 has undoubtedly been a tough year for the business, starting with the impact of COVID-19 restrictions and ending with the widely reported and ongoing supply chain challenges. Although we have been able to partly mitigate these external factors, they have still had a significant impact on underlying trading.

“Despite this, we have made excellent progress on the strategic initiatives which are firmly within our control, including the accelerated roll-out of Morrisons Daily conversions within our estate, which is ahead of our expectations. These Morrisons Daily stores are generating strong sales growth and enhanced return on investment. In less than a year’s time, we expect over half our revenues to be delivered by this fascia, bringing branded, supermarket-quality convenience to our customers, with material scope to deploy further into our estate.

“None of this could be achieved without our brilliant colleagues, who have been working incredibly hard to keep supplying our community stores with the food, goods and services they need, as well as the support from existing and new shareholders through the capital raise last August.”