McColl’s has extended its supply agreement with Morrisons and announced plans to convert hundreds of its stores to the supermarket’s convenience format.
Morrisons’ wholesale operation began supplying McColl’s in 2018. Under the terms of the new agreement, the two firms have extended their partnership by a further three years, with Morrisons now acting as McColl’s sole wholesale supplier for its entire 1,200-strong estate out to 2027.
Morrisons supplies McColl’s across all ranges, including brands and the Safeway label where further range extensions are now planned.
Meanwhile, McColl’s revealed that it plans to roll out the Morrisons Daily format to 300 of its stores over the next three years with the support of its supermarket partner. This follows the strong performance of the initial 31 former McColl’s outlets now operating under the Morrisons fascia that have benefitted from “a higher mix of grocery sales, breadth of offer and value proposition”.
McColl’s stated that the moves represent a “significant milestone” in its strategy to become a food-led convenience retailer, giving it even greater access to Morrisons grocery expertise and brand.
The group confirmed today that the strategy is supported by its existing banking syndicate, with an agreement in place to amend debt facilities to provide increased headroom and extend the maturity of the facility to February 2024. The updated facility consists of a £100m revolving credit facility and an amortising £67.5m term loan.
Jonathan Miller, Chief Executive of McColl’s, said: “I am delighted to extend our partnership with Morrisons by a further three years, ensuring the continued supply of a supermarket-quality offer across our entire estate, as well as the planned conversion of additional Morrisons Daily stores.
“Today’s important milestone has been achieved with the welcome support of our banking syndicate, enabling us to execute our strategy to deliver sustainable profitable growth.”
David Potts, Chief Executive of Morrisons, added: “Today’s agreement is another example of Morrisons extending the reach of our popular brand. In doing so, we are building a broader, stronger Morrisons for customers, and leveraging our existing assets to achieve capital light, profitable growth.”
McColl’s also gave an update on current trading in which it revealed that strong demand for its local convenience offering led to like-for-like sales growth of 7.9% in the 12 weeks to 21 February 2021. However, it noted that the shift in the pattern of trade away from higher-margin impulse categories continued to generate lower gross margins overall.
NAM Implications:
- This partnership is patently working.
- And given the inevitability of post lockdown turbulence…
- …can only further improve.
- Time to ensure you achieve and maintain your fair share of investment and return?
