A leading retail analyst has said that convenience store chain McColl's Retail Group has been "slow to adapt" to a retail industry that is increasingly embracing online and foodservice.
Thomas Brereton of GlobalData was commenting following the publication of McColl's preliminary full-year results, in which the business saw total revenue down 1.8% to £1.22 billion (€1.43 billion), as a result of store closures and divestments.
'Highly Competitive'
"McColl’s has clearly struggled to compete in the highly competitive convenience sector," Brereton said in a briefing note. "Its store portfolio reshaping over the past couple of years and rapid change of product offer has disrupted its image and – alongside the collapse of supplier Palmer & Harvey in 2018 – left customers feeling dissuaded to choose McColl’s over its numerous rivals."
While competitors in the convenience sector, such as The Co-operative, have forged partnerships with the likes of Deliveroo, embracing the foodservice sector, he added, "McColl’s has been slow to adapt to this thriving method of grocery shopping, with currently no online retail presence whatsoever.
"And while McColl’s may have not felt the need to so far alter its business model to gain from e-commerce shoppers (considering its prominence in towns where there are fewer convenience operators), this uncreative approach has its rivals surpass it."
Building For The Future
McColl's has said that it is embarking on a 'strategic change' programme in order to better service the needs of its communities, on a 'neighbourhood by neighbourhood' basis.
This will include better store segmentation, range development, space allocation and value positioning, the group said, as well as a 'fundamental reset' of its operating model, including the embrace of new technology.
Commenting on its full-year performance, Brereton added that operational performance at "McColl’s is far from horrendous. The 1.8% fall in revenue is largely explained by the divestment of 120 underperforming, smaller locations, and its flat l-f-ls are broadly in line with the Big Four for the same timeframe following an extended period of colder weather and lower consumer confidence in 2019 compared to 2018."
'More Focused'
Elsewhere, Adam Tomlinson, an analyst with Liberum, said that the firm's management "deserves credit for the stabilisation achieved in FY19", noting that the strategy at the business is now "more focused" than it was in the past.
"While it is early days, we are encouraged by some green shoots in H2," he said. "We see the dividend suspension as sensible, while work continues to restore balance sheet health.
"The shares have been harshly punished and we think the risks are now more than factored into the low valuation, which may re-ignite talk around McColl’s as an M&A target."
© 2020 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.
