McColl's, the leading neighbourhood retailer, with an estate of over 1,200 managed convenience stores and newsagents, is set to raise up to £35m to expand its partnership with supermarket chain, WM Morrison (Morrisons).
As part of its Morrisons deal, McColl’s will be converting a large number of its stores into Morrison Daily stores. The company said its existing Morrisons stores are its top-performers.
Jonathan Miller, Chief Executive of McColl's, said, 'The Capital Raising represents a transformational opportunity to accelerate our strategy and capitalise on the growth opportunity available to us in food-led convenience.
'We are delighted with the progress we have made so far with the roll-out of Morrisons Daily conversions within our store estate. We have a supermarket-quality offer and now also a proven blueprint that offers a strong return on investment, delivering double-digit sales uplifts and fast payback.
'The proceeds of the Capital Raising will enable us to build on this foundation by accelerating the pace of the roll-out of our Morrisons Daily conversions to deliver 50 additional conversions on top of the original 300 planned, and to complete the roll-out a year earlier than current plans.
'The Capital Raising will also enable us to further improve the grocery infrastructure of these sites to enhance profit potential, as well as further invest in our wider estate and reduce leverage.'
Miller went on, 'Morrisons' core grocery proposition, with its brand, quality and product range, is perfectly complemented by McColl's' neighbourhood store locations, strengths in core impulse sales categories, and expertise in running services such as Post Offices.
“Convenience is a growing market and the Covid-19 pandemic has served to expedite structural customer trends that play to our competitive strengths and that we believe are here to stay, including more frequent top-up shops alongside a focus on fresh food and groceries at great value.'
'We have a clear plan for growth and the Capital Raising will enable us to drive long-term sustainable growth to drive shareholder returns.'
The group also published its Interim results for 26 week period ended 30 May 2021 showing like-for-like sales growth of 1% and two-year like-for-like sales growth of 7.4%. Total revenue was down 5.3% to £572.7m (2020: £604.8m), principally reflecting store closures.
Miller said, 'We have continued to play an important role serving local neighbourhoods through the challenges of COVID-19, sustaining like-for-like sales growth despite the strong prior year comparator in Q2 following the first national lockdown.
“Many of the changes in consumer behaviour we have seen since the onset of the pandemic have continued in 2021, with customers spending less on impulse goods, but buying more take-home and multipack products, impacting overall margins.
'Alongside the impact that the industry-wide shortage of delivery drivers has had on our product availability, we are confident that these temporary trading effects will reverse as restrictions ease and distribution returns to normal.
“During the period we made good progress against our strategic initiatives. We are delighted with the performance of our Morrisons Daily conversions and we now have a blueprint for this model that offers a strong return on investment.'
Miller closed, “Looking ahead, whilst the wider economic outlook remains uncertain, we have clear demand for our grocery-led convenience offer, and our focus in the second half will firmly be on the continued roll-out of the Morrisons Daily stores, to help drive sustainable, profitable growth over the medium term.”