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McColl’s expects revenue growth to moderate but continued margin pressure

Business rates relief is estimated to be offset by the costs of safety measures, while lower impulse spend is to hit margins

McColl's Retail Group - McColl’s expects revenue growth to moderate but continued margin pressure
Sales were driven by grocery shopping during lockdown

McColl’s Retail Group PLC (LON:MCLS) said it expects revenue growth to moderate in the second half of the year as lockdown eases.

The convenience store chain benefitted from its status of essential retailer during the pandemic, though business rates relief is estimated to be offset by the costs of safety measures, while lower impulse spend is to hit margins.

The retailer saw stronger demand in food-based stores, including the 30 Morrisons Daily trial stores so it is working with the grocery giant to supply all its estate.

In the six months to May 24, revenue dipped 1% to £604mln reflecting store closures and lower services revenue due to the temporary withdrawal of scratch cards, offset by stronger demand since the COVID-19 outbreak in the UK.

Last year’s £200,000 profit before tax swung to a £1mln loss while net debt was £284mln at period-end. The firm did not declare an interim dividend.

Analysts at Peel Hunt downgraded the stock to ‘add’ from ‘buy’ and reduced the price target to 50p from 70p due to “less earnings momentum than hoped”.

“Getting closer to Morrisons in whatever form is the best answer here but it’s hard to see the shares get much above their recent highs,” analysts added.

Shares slid 12% to 35.9p on Thursday morning.

Quick facts: McColl's Retail Group

Price: 22.824 GBX

LSE:MCLS
Market: LSE
Market Cap: £26.3 m
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