McColl's profits hit by Palmer & Harvey collapse

McColl’s was hit by disruption to supply following the collapse of supplier Palmer & Harvey, but said it was confident in its long-term strategy.

Profit before tax fell from £18.4m to £7.9m in the year to November 5, 2018, when total sales rose 8.1% to £1.24bn.

MColl’s said like-for-likes fell 1.4% as disruption to its supply chain bit, but they improved over the year to become flat in the final quarter and so far in the new financial year like-for-likes have advanced 1.2%.

The demise of Palmer & Harvey meant that McColl’s had to press the accelerator on a supply deal with Morrisons, which was done three months ahead of schedule.

McColl’s chief executive Jonathan Miller said: “2018 was undoubtedly a challenging year, marked by supply chain disruption following Palmer & Harvey’s entry into administration and the accelerated transition to our new supply partner Morrisons.

“Despite this disruption, we continued to make progress against a number of our key strategic plans.

“We completed the roll-out of 1,300 stores to Morrisons supply in less than nine months, which represents a considerable achievement and provides us with a more secure supply chain and a higher-quality chilled and fresh offer.

“We also continued to invest in our estate, with 59 convenience store refreshes completed in the year and 11 new stores acquired.

“We are a profitable and cash-generative business, and our priority for the year ahead is to rebuild operational momentum and we remain confident in delivering our strategic plans.”

Safeway range rolled out across most stores

Speaking to Retail Week this morning, Miller said that McColl’s had now rolled out its Safeway range across the 1,300 stores that are supplied by Morrisons. He said that it would not be rolled out across the entire portfolio of McColl’s stores until its supply deal with Nisa on circa 300 stores it acquired from the Co-op in 2017 ends in 2020. 

”The stores we bought from the Co-Op are under contract with Nisa until 2020, Safeway won’t be appearing in those stores until they’ve transitioned to Morrisons. But the Safeway range is fully deployed across all other stores. We’re looking to develop that range and extend it as time progresses. It needs to be refined to meet customer demand.”

Miller said that McColl’s was “as well prepared as we can be” for the possibility of a no-deal Brexit, and had historically proved to be a “pretty resilient business”. 

”McColl’s is a pretty resilient business, in fact during the last recession our like-for-like sales were positive. That’s because 90% of our customers live within 400 metres of our stores. We’ve got regular repeat customers and low basket size, so we’re not particularly exposed to discretionary expenditure in the way that some retailers on the high street are. We’re as confident as we can be, with the planning we’ve done.”

He said McColl’s had not been stockpiling itself, as it didn’t have any of its own warehouses.