Shares in convenience retailer McColl’s fell nearly 30% this morning after it warned of lower annual profits due to the industry’s supply chain problems impacting product availability in its stores, with a consequential effect on revenues.
In a brief trading update, McColl’s highlighted that disruption to its business caused by shortages of delivery drivers, labour shortages at distribution centres, and insufficient supply of key products, including high margin branded impulse lines, had intensified in the fourth quarter.
The group stated that it had been working with its wholesale partner, Morrisons, to lessen the effect of the disruption. However, it has been unable to fully mitigate the impact on its 1,200+ stores, which meant revenues were “significantly lower” than it had initially anticipated. McColl’s now expects full-year adjusted EBITDA to come in between the range of £20m and £22m. The group stressed that its lending banks remain supportive.
Jonathan Miller, Chief Executive of McColl’s, said: “It is disappointing to see supply chain issues worsen through the second half, but external factors have not eased, and continue to impact much of the UK economy. We are working collaboratively with our wholesale partner Morrisons to restore in-store product availability as quickly as possible.”
On a brighter note, McColl’s revealed that the Morrisons Daily stores that have been converted are seeing revenue growth well ahead of the rest of its estate. As a result, the group expects payback of converting the stores to be less than the 2-3 years previously indicated and the roll-out is being accelerated. Around 150 Morrisons Daily stores are expected to be in operation by the end of November 2021, putting it on track to hit its target of 350 conversions ahead of the original November 2022 date.
Miller added: “Despite these supply chain issues, I am delighted by the step change we are witnessing in store performance from our Morrisons Daily conversions. This new format is showing strong sales growth and is delivering better ROI than we expected. Our conversion programme is moving at pace, ahead of time and on budget.”
NAM Implications:
- Supply chain issues:
- shortages of delivery drivers
- labour shortages at distribution centres
- insufficient supply of key products, including high margin branded impulse lines
- …have obviously impacted McColls.
- Raising the question: To what extent is Morrisons affected?
