McColl’s is to continue prioritising its Morrisons Daily offer, with plans to have a 350-site estate by November 2022.

During the first six months of the year, it introduced 25 new Morrisons Daily conversions, bringing its total to 56, McColl’s estimating it can now roll out six stores per week.

This came in its interim results for the 26 weeks to 30 May 2021, in which McColl’s reported like-for-like sales growth of 1% while two-year like-for-like sales were up 7.4%. Total revenue was down 5.3% to £572.7m from £604.8m in 2020 which was attributed to store closures.

Chief executive Jonathan 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.”

Miller praised the work being done on Morrisons Daily. “During the period we made good progress against our strategic initiatives,” he said. “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.

“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.”

McColl’s also separately announced a proposed Capital Raising comprised of a firm placing to raise £30m (before expenses) and an open offer to raise up to £5m (before expenses) to increase the number, and accelerate the pace of rollout, of Morrisons Daily stores from 56 to 350 by the end of the financial year ending November 2022, which is an increase of 50 stores against the Group’s previous target of 300 stores by the end of December 2023, and to further improve the grocery infrastructure in the Morrisons Daily sites, including the expansion of the chilled offer.

The Group said it was “convinced that the combined ‘best of both’ store format is a winning combination”.

“McColl’s key neighbourhood store locations, strengths in convenience operations and expertise in services, such as Post Office, are perfectly complemented by Morrisons core grocery proposition.”

It reported that Morrisons Daily stores have the highest revenues out of all stores operating in the estate, “due to a high grocery mix and wider product choice for customers”.

“The Morrisons Daily format allows us to grow customer spend, frequency and loyalty by growing the basket size, offering customers access to great value fresh food at close to supermarket prices, on their doorstep, under the Morrisons brand, which is synonymous with fresh food. The rollout of Morrisons Daily stores ties in with the Group’s strategic focus on the larger convenience store format, to drive incremental sales in grocery, fresh food and alcohol, providing opportunities for sales mix improvement.”

HGV driver shortage warning

It did warn that if the HGV driver shortage continues, its full-year financial performance would be impacted.

“Revenues have been impacted by availability issues in stores over recent months due to supply chain disruption. This has been caused by the widely publicised nationwide shortage of delivery drivers due to a combination of external factors. We have put in place a number of temporary mitigating actions and continue to work closely with our supply chain partner to resolve these challenges as quickly as possible.

“If these challenges to trading do not materially improve in the second half of the financial year, the performance in the full year is likely to fall short of management expectations. Notwithstanding these short-term headwinds, we remain optimistic for the future. Management believes that a post pandemic trading environment, coupled with the significant benefits of the acceleration and scaling up of its Morrisons Daily roll out, will allow the Group to significantly exceed its current performance.”