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McColls convenience stores operator issues a profits warning linked to collapse of wholesaler

PUBLISHED: 10:42 03 December 2018 | UPDATED: 10:42 03 December 2018

The McColls convenience store on Maidenhall Green

The McColls convenience store on Maidenhall Green

Shares in McColl’s nosedived today after the convenience store operator issued a profits warning linked to the collapse of the Sussex-based wholesaler Palmer & Harvey.

The group said that the failure of the supplier last year resulted in “significant supply chain disruption,” and that it is “continuing to experience a number of challenges.”

The company has operates 11 convenience stores in Suffolk, including six in the Ipswich area.

As a result, McColl’s now expects adjusted earnings for the full year to come in at about £35 million, down from a previous estimate of £44 million.

Shares tanked over 24% to 90p shortly after the open.

In a trading update, the group, which has a supply partnership with supermarket Morrisons, saw total revenue fall 0.5% in the fourth quarter, while comparable sales were flat. Full-year like-for-like sales were down 1.4%.

McColl’s chief executive Jonathan Miller said: “2018 has been a very difficult year for the business, marked by unprecedented supply chain disruption and ongoing challenges.”

In addition, McColls said its plan with Morrisons to resurrect the Safeway brand was also disrupted by the Palmer & Harvey collapse.

The group said: “Following the collapse of Palmer & Harvey, we have experienced significant supply chain disruption and have needed to accelerate the rollout of Morrisons supply to 1,300 of our stores.

“The speed of this transition has created significant challenges and severely disrupted our plans for the launch of Safeway.”

McColl’s added that cost pressures and uncertainty will result in adjusted earnings for next year only modestly improving.

Mr Miller said: “Looking ahead, we expect competition in the grocery retail sector to remain intense and we face significant cost pressures.

“Important to our future success will be continuing to develop our partnership with Morrisons, alongside our plans to enhance our neighbourhood convenience offer by improving the quality of our estate and our overall customer experience.”

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