McColls profit dips in FY20 despite rising convenience demand
Whilst pre-tax profit fell from £7.4m to £1.1m, like-for-like sales rose by 12% due to a ‘strong’ demand in convenience products and key neighborhood locations
McColls has announced that its profit for the year ended 29 November 2020 slipped by 4.7% to £300.9m, despite noting that demand for its local convenience retail offering has “never been higher”.
Whilst pre-tax profit fell from £7.4m to £1.1m, sales were up by 3.2% to £1.258bn in the period, while the group also reported a like-for-like sales growth of 12%.
Its total sales figures reportedly reflect the “strong demand” of convenience products since the onset of the pandemic, though this was partly offset by divestments and store closures as it progressed its store optimisation programme.
Meanwhile, like-for-like sales were said to be driven by a strong performance in alcohol, fresh food and tobacco, as well as its positioning of stores in “key” neighbourhood locations.
Its full-year results closely follow news that its Morrisons wholesale partnership has been extended for a further three years to 2027, in a move that will enable a “more comprehensive grocery offer”, according to the group.
It added that the agreement represents a “significant milestone” in McColl’s’ strategic goal of becoming a food-led convenience retailer. The group now plans to accelerate the Morrisons Daily format, with 300 store conversions planned over the next three years.
Looking ahead, the group has already seen a like-for-like sales growth of 8.8% in the 15 weeks to 14 March 2021, despite the ongoing operational challenges caused by the pandemic.
As lockdown restrictions begin to ease, it also expects its sales mix to normalise, with a “progressive reversion” towards pre-pandemic margins. However, the group said it remains cautious amid a “highly uncertain environment, with little visibility on macroeconomic and consumer trends for the remainder of 2021”.
CEO Jonathan Miller said: “Over the last 12 months we have seen strong like-for-like sales growth, driven by the positioning of our stores in key neighbourhood locations and our strong customer offer. Despite the operational challenges of the pandemic, we have made good progress on our customer-focused strategic change programme.
“We recently reached a key strategic milestone, announcing a new supply deal with Morrisons, ensuring the continued supply of supermarket quality food across our entire estate for the next six years, supported by a bank facility extension.”
He added: “I am delighted with the opportunity this brings to convert 300 stores to the successful Morrisons Daily format over the next three years. These stores will be particularly well suited to the changing customer dynamics that are resulting from the pandemic.
“Looking ahead to 2021, whilst uncertainties and restrictions remain, there is no doubt that the strategic importance of neighbourhood stores has never been greater, and we are well positioned to deliver for customers and shareholders, as we continue to enhance our convenience offer.”
