McColl’s warn­ing raises red flags /

Sup­ply chain dis­rup­tion and mar­gin pres­sures maul earn­ings at McColl’s

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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

Safe­way brand.

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)

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