McColl’s Retail Group PLC (LON:MCLS) saw its shares drop 8% on Monday after it revealed a fall in current year like-for-like (LFL) sales impacted by the collapse of wholesaler Palmer & Harvey (P&H) at the end of November.
In an update on currency trading with its full-year results statement, the FTSE All-Share listed firm said total LFL sales for the 11 weeks to 11 February 2018 were down 2.2%, held back by a 3.6% fall in LFL sales in stores formerly supplied by P&H, although total sales continued to perform strongly, up 26.7%.
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The company said: "We have put in place contingency arrangements, entering into a new short-term supply contract with Nisa on 4 December 2017 for the affected stores. We also began our new supply partnership with Morrisons (LON:MRW) (agreed in August 2017) earlier than previously scheduled to supply these same stores with tobacco.
"Whilst these contingency agreements have largely ensured continuity of supply, we continue to closely manage distribution to these stores and the disruption has impacted our sales performance."
For the full-year to 26 November 2017, McColl’s total LFL sales rose 0.1%, helped by significant mix improvements as a result of growth in key grocery categories alongside some declining traditional categories, with total revenue increase jumping by 19.1% to £1.13bln, boosted by the successful integration of 298 convenience stores, completed in mid-July 2017.
The group saw its full-year pre-tax profit increase to £18.4mln, up from £17.7mln a year earlier, as gross margin rose by 60 basis points to 25.7%, up from 25.1% the previous year.
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In a note to clients, analysts at Liberum Capital noted that the fall in current LFL sales was well below their forecast for a 0.4% decline.
They said: "We expect this to see consensus forecasts come down towards an EBITDA range of £50m-51m (vs. c.£54m currently)."
But, the analysts added: "That said, we believe this short-term impact needs to considered in the light of overall strategic progress being made by the group, including the transition to Morrisons as its single supplier over 2018. Whilst there may be some disappointment today, it is not wholly unexpected and we maintain our buy on the long-term view.”
In mid-morning trading, McColls shares were down 5.6% at 235p, off earlier lows of 221p.
The group proposed a full-year dividend of 6.9p, up from the 6.8p paid a year earlier.