McColl’s to close under-performing shops amid profit margin pressures

Convenience store chain McColl’s has admitted it needs to focus on product availability in its shops and close under-performing sites, as profits were almost wiped out in the last six months.

The announcement came as the company revealed it had closed or sold 41 newsagents and smaller stores, but opened three new stores and rolled out 10 revamped Morrisons Local sites.

Profit margins were also under pressure, as the McColl’s continues to feel the effects of the collapse of its supplier, Palmer & Harvey, last year, although sales of alcohol and tobacco were strong.

Overall, sales grew just 0.1% in the six months to May 26 – mainly due to store closures – with like-for-like sales up 1%.

Pre-tax profits fell to just £200,000, compared with £2.3 million during the same period a year ago.

Jonathan Miller, chief executive of McColl's
Jonathan Miller, chief executive of McColl's

Chief executive Jonathan Miller said: “I am encouraged by the performance we have delivered as we regain greater operational stability, but we still have more work to do in the second half of the year.

“The market remains highly competitive, with challenging trading conditions, given the unseasonable weather and uncertain economic climate.”

He also revealed that May was particularly bad, calling it “a challenging month for the whole sector, as the UK experienced a prolonged period of poor weather compared to the start of last year’s long hot summer”.

Profit margins fell as McColl’s suffered from switching suppliers from Palmer & Harvey to Morrisons.

The company said: “We are experiencing some challenges with higher-than-anticipated cost prices.

“Some progress has been made as we’ve worked with Morrisons on addressing this, which has helped to moderate the decline in gross margin year on year, and we expect to see further improvement in the second half of the year as it remains a key area of focus.”

Product-wise, bosses said tobacco, beer, wines and spirits all performed well, with cigarettes “benefiting from inflation as a result of manufacturer and duty rises”.

An improved range of drinks helped alcohol sales and the food-to-go category also has “great potential”, the company added.

However, McColl’s admitted that it remains “over-indexed” in declining sweets and chocolate categories, along with news.