McColl’s proceeds with shift to convenience

A fall in earnings was blamed on 'Covid-19 related costs', 'margin pressure due to change in product mix' and changes in consumer behaviour


McColl’s is pushing onwards with its march towards convenience as its earnings stall despite a Covid-driven rise in sales.

The neighbourhood retailer said like-for-like sales were up by 12% as it announced its full-year trading update. However, the figure excludes any stores closed due to loss of footfall during the coronavirus pandemic and earnings were expected to be down by as much as £3.1m year on year from £32.1m in 2019.

The senior team blamed “Covid-19 related costs”, “margin pressure due to change in product mix” and changes in consumer behaviour. While higher-margin alcohol and fresh food categories were up, so were lower-margin categories such as news and tobacco. McColl’s also chose to shrink its margins across staples such as chilled foods, fruit and vegetables, and milk to keep prices down.

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The focus on essential items comes as McColl’s continued its pivot from operating a chain of newsagents to convenience stores. All of its stores will be supplied by Morrisons by March 2021 and it is also looking to expand its current 31-site franchise trial of the Morrisons Daily format.

McColl’s said the supermarket-branded locations were its “strongest performing”. Conversely, the chain had closed 179 stores in the past 12 months to focus on “larger, more profitable convenience stores”. The group’s total revenues were £1.25bn, up by 2.3%.

Business sellers Everett Masson & Furby currently list 99 leasehold McColl’s Retail Group sites on the market starting at £10,000 and valued up to £85,000. These include both the Martins newsagent and McColl’s convenience format locations, some with Post Offices or living quarters included. It is unclear whether the sites are included in the 179 closed sites or represent further disposals by the group.

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Chief executive Jonathan Miller said: “Despite the challenges of 2020, the pandemic has reinforced our confidence in our ongoing strategic change programme. The importance of neighbourhood stores has never been greater, and we are well positioned to continue enhancing our convenience offer by further developing our partnership with Morrisons, and further improving the quality of our estate and our overall customer experience.”

The group listed beer, wine and spirits, grocery and fresh categories as its continued focuses as it enters 2021. McColl’s forecasts that its revenue growth would slow down and its sales mix would “normalise” over the course of the coming year as the hoped-for end of the pandemic brings a
return to normal shopping habits.

Find out more on our coronavirus information hub for retailers


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