McColl’s warning raises red flags /
Supply chain disruption and margin pressures maul earnings at McColl’s
CONVENIENCE STORES-TO-NEWSAGENTS operator McColl’s Retail (MCLS) has taken a mauling following poor half year results (23 Jul) and a damaging profit warning.
Sentiment toward the stock, down from 294p last October to 157p, has also been hit by the resignation of finance director Simon Fuller, who is off to newspaper publisher Reach (RCH).
Heavily affected by supply chain disruption following the administration of Palmer & Harvey and the ‘Beast from the East’, McColl’s half year profits slumped on a 2.7% decline in like-for-like sales.
Warm weather has subsequently helped like-for-likes to improve, yet full year adjusted earnings will be flat and McColl’s cautioned that ‘looking further ahead, to 2019 and beyond, it will remain important to manage intense cost pressures in the business, whilst also investing in the customer offer to maintain our competitive position.’
Numis Securities lowers its 2018 earnings estimate from £50.4m to £43.4m and its 2019 estimate from £54.9m to £45.8m.
McColl’s is making progress with its acquired Co-op stores and the successful introduction of the
However, Liberum Capital points out the structural premium price gap enjoyed by convenience operators is narrowing, partly driven by increased industry M&A and the rise of the discounters and warns this consolidation may force a more capital intensive model upon McColl’s. (JC)