McColl’s shares plunge 15% as Palmer & Harvey collapse halves profits
The convenience store operator said it suffered ‘unprecedented supply chain disruptions’.
McColl’s shares plunged after half-year profits halved, with the convenience store operator having suffered “one of the most challenging” trading periods to date following the Palmer & Harvey collapse.
The retailer saw pre-tax profits tumble to £2.3 million over the 26 weeks to May 27, compared with £4.5 million during the same period last year.
The company was hit with costs linked to the collapse of Palmer& Harvey, which fell into administration in November and caused “unprecedented supply chain disruptions”.
It also affected McColl’s like-for-like sales, which fell 2.7% in the first half of the year, with weather disruptions and tough competition resulting in additional strain.
During the first half we experienced unprecedented supply chain disruption following the collapse of P&H last November McColl's chief executive Jonathan Miller
The news sent McColl’s shares down more than 15% in morning trading.
Chief executive Jonathan Miller said it was “one of the most challenging six months the business has ever faced”.
“During the first half we experienced unprecedented supply chain disruption following the collapse of P&H last November.”
“This temporary upheaval has inevitably impacted sales and margin performance in the c.700 stores that were formerly supplied by P&H, and has also had knock-on effects on the rest of the estate.”
As a result, McColl’s launched a supply partnership with Morrisons earlier than planned, with the grocery group now set to be stocking 1,300 of its stores ahead of schedule in early August.
Mr Miller also highlighted the relaunch of the Safeway brand at its stores and promised improved earnings.
“We will therefore have a progressively stronger and simpler operational position with a more compelling offer as we move through the second half and into 2019.”
Total revenue for the period rose 19.2% to £601.7 million, which McColl’s said was driven by the acquisition of around 300 convenience stores from Co-op in 2017.
It said food categories like chilled and fresh produce were making strides, growing 48% and 45% respectively.
The chief executive said McColl’s would continue to improve the quality of its estate through store refurbishment and said further acquisitions were on the cards.
“As the convenience sector continues to grow, we remain confident that our clear strategy will allow us to make further progress and deliver sustainable returns for shareholders.”
McColl’s also announced the departure of its finance chief, Simon Fuller, who is leaving to take up the same role at Reach – the newspaper group known previously as Trinity Mirror.
The company said Mr Fuller will stay in his post until a replacement has been found and an “orderly handover” has taken place.