Convenience store operator McColl’s saw its first half like-for-like sales climb 8.3% after benefitting from stronger demand for food and alcohol during the pandemic.
Over the six month period to 24 May total revenue slipped 1% to £604.8m due to 65 store closures as part of group’s ongoing estate restructuring programme towards convenience-focused outlets. There was also a decline in services revenue following the temporary withdrawal of scratch cards.
The chain suffered some gross profit margin dilution, slipping from 25.4% to 24.9%, after consumers moved away from impulse purchases to lower margin take home products as well as multibuys and value items. McColl’s highlighted that it had decided to invest in price to maintain good value for existing customers and “build loyalty” amongst the additional shoppers visiting its stores.
On pre IFRS 16 basis, the group’s adjusted EBITDA was relatively unchanged at £13.1m after the gross margin dilution and additional costs related to the crisis were offset by higher sales, cost controls and business rates relief. However, McColl’s reported a statutory loss before tax of £1.3m from a profit of £200,000 last year following a rise in finance costs.
McColl’s Chief Executive Jonathan Miller said: “We have seen an extraordinary change since the onset of the crisis. Strong demand, reaching double digit like-for-like sales in recent months, has been accompanied by a significant shift in the pattern of trade. Food grocery and alcohol sales have been particularly strong, in line with our longer-term strategy to grow these categories as part of our total sales mix. Meanwhile, customers have been spending less on impulse and buying more multipack products.”
Looking ahead, McColl’s said it will be difficult to predict the full impact and duration of the coronavirus outbreak on sales and costs. Although the business is currently experiencing strong demand, it is expecting to see continued margin pressure and ongoing cost headwinds relating to the implementation of social distancing and safety measures.
NAM Implications:
- On balance, McColl’s doing as well as can be expected.
- Having done the heavy lifting re cost control…
- …and building some extra loyalty…
- …now worth some investment by suppliers to share some of the post-lockdown upturn?
