Shares in embattled McColl’s Retail (MCLS) slumped 26% to an all-time low of 13.4p on Wednesday after the convenience store operator downgraded annual earnings guidance once again, pinning the blame on continuing supply chain disruption.
The earnings alert follows a profit warning served up in August, when the retailer reported disappointing first half figures and flagged that supply chain disruption was hitting product availability.
In today’s share price-punishing update, McColl’s said it now expects adjusted EBITDA for the year to December 2021 to be in the £20 million-to-£22 million range, significantly south of already-lowered previous guidance of £29 million.
Rather ominously, McColl’s said it continues to monitor the situation with key stakeholders including its lending banks, although they ‘remain supportive’.
SUPPLY CHAIN PAIN INTENSIFIES
Supply chain disruption has intensified in the fourth quarter, warned McColl’s, driven by an ongoing nationwide shortage of delivery drivers, labour shortages at distribution centres and insufficient supply of key products including high margin branded impulse lines.
McColl’s continues to ‘work collaboratively’ with wholesale partner Morrisons to lessen the effect of the disruption. Unfortunately, it has been unable to fully mitigate the impact to stores, leading to ‘significantly lower revenues than initially anticipated’.
CONVERSIONS AHEAD OF SCHEDULE
The supply chain pain overshadowed a positive update on the performance of McColl’s Morrisons Daily stores, which continue to deliver strong performance, ‘with revenue growth significantly ahead of the rest of the estate driven by a high grocery mix and wider product choice for customers’.
Struggling MColl’s pre-tax losses widened from £1.3 million to £5.9 million in the first half to May 2021, with net debt increasing from £79.5 million to £111.3 million year-on-year.
However, the company has since raised fresh equity in order to fund an increase in the number of Morrisons Daily store conversions, accelerate the pace of roll-out of its Morrisons Daily store conversion programme and strengthen the balance sheet.
On 12 October, McColl’s announced the opening of its 100th Morrisons Daily and the pace of store conversions has since accelerated, so much so that the group expects to have more than 150 Morrisons Daily stores in operation by the end of November 2021.
‘At this pace, we anticipate reaching our targeted number of 350 conversions well ahead of our original date of November 2022’, added McColl’s.
CEO Jonathan Miller commented: ‘It is disappointing to see supply chain issues worsen through the second half, but external factors have not eased, and continue to impact much of the UK economy.
‘We are working collaboratively with our wholesale partner Morrisons to restore in-store product availability as quickly as possible.
‘Despite these supply chain issues, I am delighted by the step change we are witnessing in store performance from our Morrisons Daily conversions. This new format is showing strong sales growth and is delivering better return on investment than we expected.’
