// McColl’s records 85% plunge in adjusted pre-tax profits after being hit by Covid-19 costs & lower margins
// Gross profit dropped 4.7% to £300.9m, while adjusted EBITDA (pre IFRS 16) fell 9.3% to £29.1m
// However, annual sales rose 3.2% to £1.26bn, with like-for-like surge of 12%
McColl’s has posted rising full-year sales and like-for-likes but profits slumped after it was hit my lower margins and ongoing costs related to Covid-19.
According to its trading update for the year ending November 29, McColl’s full-year sales rose 3.2 per cent year-on-year to £1.26 billion – driven by a 12 per cent surge in like-for-likes.
However, McColl’s said adjusted profit before tax dropped from £7.4 million to £1.1 million – a year-on-year decline of 85.1 per cent.
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- McColl’s revenue reaches £1.25bn thanks to “strong demand”
- McColl’s swings to loss as Covid-19 brings “extraordinary change”
Meanwhile, statutory loss before tax for the same full-year period narrowed to £5.3 million compared to the loss of £98.6 million recorded in the year prior.
McColl’s added that gross profit slid 4.7 per cent to £300.9 million, while adjusted EBITDA on a pre-IFRS 16 basis fell 9.3 per cent year-on-year to £29.1 million.
The retailer attributed the profit decline to a “move away from impulse purchases to lower margin take home products as well as multi-buys and value items”.
It added that its product mix had changed due to customer demands being altered by the Covid-19 pandemic, leading to a two per cent reduction in gross margin to 23.9 per cent.
It attributed the sales increase to strong demand for convenience – in particular strong sales of alcohol, fresh food and tobacco – but this was offset by McColl’s divestments and store restructuring programme.
During the full-year period, McColl’s extended its wholesale partnership with Morrisons for a further three years to 2027, which will see it convert 300 of its stores to the Morrisons Daily format.
McColl’s said this marked a significant milestone in its strategic goal of becoming a food-led convenience retailer.
“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,” McColl’s chief executive Jonathan Miller said.
“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.
“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.”
As for current trading, the retailer said like-for-like sales in the 15 weeks to March 15 had grown 8.8 per cent.
Gross margin trends were consistent with those experienced in 2020, reflecting a continued shift in sales to lower-margin take-home products and multi-packs.
“As lockdown restrictions begin to ease, we expect our sales mix to normalise with higher purchases of impulse products and a progressive reversion towards pre-pandemic margins,” McColl’s said.
“However, we remain in a highly uncertain environment, with little visibility on macroeconomic and consumer trends for the remainder of 2021.”
Miller said: “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.”
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