Convenience retail chain McColl's posted an 8.1% increase in revenue last year, however if acquisitions are excluded, like-for-like revenue was down 1.4%.
Citing supply chain disruption in the market, chief executive Jonathan Miller said that the group "continued to make progress against a number of our key strategic plans".
Here's how leading analysts saw its performance.
Thomas Brereton, GlobalData
‘‘Over the course of 2018, McColl’s has had to endure the collapse of key supplier Palmer & Harvey (severely damaging tobacco availability in particular), a profit warning at the end of November and a subsequent tumble in share price – certainly not the triumph hoped for following the sizeable acquisition of 298 Co-op stores just over two years ago.
"Unfortunately for McColl’s, this challenging year has come at a time of seismic shift in the food & grocery market, with the majority of the major players all looking to expand their influence over the budding convenience sector. While McColl’s has somewhat successfully stemmed falling LFL sales throughout the year – achieving flat LFLs in Q4 from a low of -3.1% in Q2 – it has admitted that disruption has taken its toll on strategic, innovative progress in other areas, and is now playing catch up to keep pace with rivals such as the Co-op (whose H1 LFL sales rise of 4.4% dramatically contrasts with McColl’s -2.7%.
"So while McColl’s has been keen to pull ahead in the race to convenience in recent years (with convenience stores now representing about 80% of the estate [versus newsagents] compared to 55% five years ago), it now needs to start thinking outside the box of store development and space maximisation."
Russ Mould, AJ Bell
“The convenience store operator will be glad that its 2018 results are finally published as it will allow the business to move on from what was a terrible year. Supply chain disruption caused major problems and led to a large decline in profit. While management are relatively upbeat about the outlook, it won’t be an easy ride given how competitive the grocery sector remains.
“McColl’s looks to be doing the right thing. Its net debt is coming down rapidly, it is investing in its business to keep stores looking fresh, and it is getting rid of underperforming outlets. Furthermore, it is boosting the number of stores offering hot food and coffee and has added Subway counters to 23 sites.
“Unfortunately many of its rivals are also strengthening their proposition, meaning that 2019 is not going to be a breeze for McColl’s. It needs to accelerate a shift into higher margin products to give its earnings some sort of cushion if new problems emerge. At the moment its operating profit margins are wafer-thin, leaving no room for error.”
Liberum Capital
"One should take a positive out of the recent trading improvement which sees like-for-like sales up 1.2% in the first 11 weeks of full year 2019 and at this early stage full year 2019 guidance remains unchanged.
"However, we have amended our forecasts to reflect higher depreciation and amortisation and interest going forward, resulting in a 23% cut to estimated full year 2019 earnings per share. The brokerage remains lukewarm on the stock with a ‘hold’ rating, ‘noting some positives beginning to show, but full year 2019 needs to be a year of stabilisation to give us confidence the downgrade cycle may have troughed." [Sourced from Shares Magazine]
Peel Hunt
“McColl’s prelims were as good as could be expected at this stage. It’s not going to be easy to regain the confidence of the customer or the investor base given that 2018 was doubtless an ‘annus horribilis’ but there are plenty of plans afoot to stabilise things and convenience remains firmly in growth as a wider sector.” [Sourced from Reuters]
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
