McColl’s warns of ‘softer’ trading as newsagent continues rescue talks
McColl’s has acknowledged “softer trading” as customers hold back on spending while the chain continues to try secure a financial lifeline from partners.
Shares tumbled some 50 per cent in early trading on Monday morning, after the retail firm gave an update on its rescue deal talks.
In a trading update on Monday, the convenience store chain said it had seen “mixed trading” since a previous update on 28 February.
Although a “recovery in trading performance” continued into the first half of March, the Easter period saw “softer trading” as customers face a cost of living crunch, the beleaguered company said.
Trade was impacted by “reduced consumer spending and continued supply chain disruption across the industry”, with the group working to mitigate “product availability issues.”
The board said it expected adjusted EBITDA for the 2022 financial year would not exceed a sum of £20m achieved in the previous year. A previous consensus for EBITDA had been £23.8m.
A rescue deal was “under active discussion” with Morrisons and lenders, as the company attempts to “resolve the short term funding issues and create a stable platform for the business going forward.”
“It should be noted that even if such a successful outcome is achieved it is increasingly likely to result in little or no value being attributed to the group’s ordinary shares,” the firm added, in a blow to shareholders.
The group, which has been hunting for a bidder since last year in an attempt to dodge collapse, with debts of almost £170m, said it anticipates it will delay the publication of its full year results until a resolution of financing talks.
The company warned a delay may extend beyond the end of May 2022, the firm’s current deadline for filing under listing rules. This could result in a temporary suspension of shares.
The company’s Morrisons Daily stores were performing “strongly”, with like-for-like sales growth at least 20 per cent higher than non-converted, comparable stores.
Some 69 stores have opened as Morrisons Daily stores in the 2022 financial year, with McColl’s stating its partnership with the supermarket was “fundamentally reshaping the business into a more profitable and sustainable model in the medium term.”
Uncertainty about the firm’s financial future had triggered Monday’s share price slide, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, told CityA.M.
“There is no magic wand for McColl’s,” she added, pointing to “leeway” given to the retail chain so far.
“It is a dramatic update. It has been a perfect storm of factors for McColls. It has been hit by the cost of living criticism, which has exacerbated problems it is already facing. As people try to trade down to cheaper prices, the convenience store sector isn’t seen as value focused as it could be.”