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McColl’s expects to reach 150 Morrisons Daily conversions by the end of the month

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Embattled convenience group McColl’s has warned its profits will be even lower than expected this year after supply chain issues intensified in the fourth quarter.

It follows an earlier profit warning in August as the retailer posted downbeat first-half results and flagged that supply chain disruption had hit product availability.

Shares in the group collapsed 28% as markets opened this morning as investor rushed to sell off exposure to the business. The stock hit new all-time lows of 13p having now lost half its value throughout 2021.

This morning, McColl’s said the ongoing shortage of delivery drivers, labour gaps at distribution centres and “insufficient” supply of key products, including high margin branded impulse lines, had worsened in the final three months of the year.

The group said it was working “collaboratively” with wholesale partner Morrisons to lessen the effect of the disruption, but it was unable to fully mitigate the impact on its stores.

Revenues for the year are now expected to be “significantly” lower than forecast, with EBITDA to be in the range of £20m to £22m - a big drop from the already lowered £29m previously guided.

McColl’s said it continued to monitor the situation with its key stakeholders, including the lending banks, which remained “supportive”.

CEO Jonathan Miller added it was “disappointing” to see supply chain issues worsen through the second half.

He said: “We are working collaboratively with our wholesale partner Morrisons to restore in-store product availability as quickly as possible.”

McColl’s also announced this morning that its conversion of Morrisons Daily stores were ahead of schedule and the format continued to deliver a “strong” performance, wtih revenue growth significantly ahead of the rest of the estate, driven by a high grocery mix and wider product choice for customers.

On 12 October, the group announced the opening of its 100th Morrisons Daily, implementing six store conversions per week. The pace has since accelerated, and the company now expected to reach more than 150 Morrisons Daily stores in operation by the end of November.

McColl’s predicted it would reach the targeted 350 conversions well ahead of the original date of November 2022.

“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 ROI than we expected. Our conversion programme is moving at pace, ahead of time and on budget, and we anticipate reaching 350 Morrisons Daily stores well in advance of our original target.”

“I would like to thank our 16,000 colleagues who are working tirelessly to restore product availability to normal levels across our estate so that we can continue to serve our local communities to the very best of our abilities every single day.”

Morning update

Inflation in the UK ballooned in October to the highest rate in almost a decade as fuel and energy costs soared.

The Office for National Statistics revealed the consumer price index surged to 4.2% last month, up from 3.1% in September, which had been a slight fall on August’s rate of 3.2%.

October’s reading is higher than predicted by economists and more than double the Bank of England’s target.

ONS chief economist Grant Fitzner said increased household energy bills due to the price cap hike, a rise in the cost of second-hand cars and fuel as well as higher prices in restaurants and hotels drove the rate steeply higher in October.

“Costs of goods produced by factories and the price of raw materials have also risen substantially and are now at their highest rates for at least 10 years,” he added.

The FTSE 100 dropped another 0.2% to 7,314.26pts in reaction to the inflation data.

Logistics firm Wincanton has won a five-year contract with discount fashion retailer Primark to provide transport services for all its UK stores.

Under the contract, which begins early next year, Wincanton will make more than 50,000 deliveries to 191 stores across the UK each year and deliver significant operational efficiencies to the supply chain.

Wincanton CEO James Wroath said: “This significant contract win will see Wincanton delivering innovative operational efficiencies, reducing carbon emissions and helping Primark better serve their customers throughout the UK. It shows the strong momentum within our business, as we continue to build on new and existing partnerships with customers in our primary markets.”

Yesterday in the City

The FTSE 100 dropped 0.3% to 7,326.97pts yesterday ahead of the latest inflation figures this morning.

Premier Foods suffered a mini-sell off yesterday after posting a fall in sales and profits in its first half as numbers lapped the pandemic heights of a year ago.

Tobacco giant Imperial Brands fell 1.8% to 1,569p despite reporting higher full-year sales and profits.

THG hit fresh lows yet again, plunging another 5.6% to 185p.

Glanbia was down 4.8% to €13.04, while McColl’s Retail Group fell 7.2% to 18.1p and Nichols sank 6.3% to 1,265p.

Diageo ended the day 1.2% better off at 3,862.5p after revealing ambitious plans to increase its share of the booze market by 50% by 2030. The stock was up more than 3% to record highs in the early trading before slipping back.

Shares Domino’s Pizza Group rose 1.8% to 523.6p following the appointment of David Surdeau as interim CFO. Surdeau is a former interim CFO at M&S.

Other risers included Parsley Box Group, Virgin Wines UK and Finsbury Food Group, up 3.3% to 47p, 2.8% to 185p and 1.6% to 98.5p respectively.