British convenience retailer McColl's warned on profit on Monday, blaming disruption relating to a new supply contract from supermarket group Morrisons and continued difficult trading conditions.
The group, which trades from 1,556 convenience stores and newsagents, forecast core earnings (earnings before interest, tax, depreciation and amortisation) for the year to 25 November 2018 of around £35 million (€39.3 million) and "no more than a modest improvement" on the 2017-18 outcome in 2018-19.
Prior to the update analysts' average EBITDA forecast for 2017-18 was £41.1 million (€41.2 million), according to Refinitiv data, and £43.5 million (€48.9 million) for the following year.
Supply Chain Disruption
Following the collapse of supplier Palmer & Harvey late last year McColl's experienced significant supply chain disruption. This meant the firm had to accelerate the rollout of Morrisons supply to 1,300 of its stores.
"The speed of this transition has created significant challenges and severely disrupted our plans for the launch of (Morrisons brand) Safeway," McColl's said.
"We are working together to address these issues and to develop an optimal range and promotional offer for the future," it said.
Lower Conversion
McColl's also highlighted a stronger performance in tobacco, relative to other categories, which has resulted in a lower conversion of sales to profit than anticipated.
McColl's said total revenue fell 0.5% in its fourth quarter, with like-for-like sales flat.
Looking ahead, the firm said it expected competition in the grocery retail sector to remain intense. It also highlighted significant cost pressures, particularly the increase in the government mandated National Living Wage.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
