MARKET REPORT: Convenience store chain McColl’s plummets 30% after second profit warning of the year

Convenience store chain McColl’s Retail Group has plummeted after issuing its second profit warning of the year.

Blaming supply chain issues and difficult trading conditions, McColl’s said like-for-like sales for the full year were down 1.4 per cent.

From September to November, the end of McColl’s financial year, total revenue was down 0.5 per cent. For the whole year it was up 8.3 per cent, but this was only due to it scooping up 298 Co-op shops.

McColl’s blamed the poor results on the collapse of its supplier, Palmer & Harvey, in November last year, as it had done in a previous profit warning in July.

From September to November McColl's total revenue was down 0.5 per cent. For the whole year it was up 8.3 per cent, but this was only due to it scooping up 298 Co-op shops

From September to November McColl's total revenue was down 0.5 per cent. For the whole year it was up 8.3 per cent, but this was only due to it scooping up 298 Co-op shops

From September to November McColl’s total revenue was down 0.5 per cent. For the whole year it was up 8.3 per cent, but this was only due to it scooping up 298 Co-op shops

Shares fell 29.8 per cent, or 35.4p, to 82.9p as the company said earnings for the full year will be around £35million, down from the £44million previously guided in July.

Russ Mould, investment director at AJ Bell, said: ‘That begs the question whether the dividend will also be cut at the end of the financial year.

‘The grocery industry is incredibly competitive and operators have to do everything they can in order to drive sales and keep costs under control.

‘Any slip-up can have disastrous consequences and put a business back both financially and strategically, and that’s exactly where McColl’s sits today.’

Palmer & Harvey’s collapse forced McColl’s to switch supplier to Morrisons faster than planned. The transition is done but the chain is still experiencing challenges.

Stock Watch – Egdon

Gas production has stepped up at the Ceres field in the southern North Sea giving Egdon Resources a boost.

Egdon owns 10 per cent of the Ceres field, which is operated by Centrica’s Spirit Energy.

Egdon’s share averaged 1.2m cubic feet of gas per day in November, which was the first full month of production since the installation of a flowmeter.

The company said its net gas sales for the month would be in excess of £235,000.

Egdon shares climbed 14.8 per cent, or 1p, to 7.75p.

McColl’s chief executive Jonathan Miller said: ‘We expect competition in the grocery retail sector to remain intense and we face into significant cost pressures.’ But things were looking up for companies on the FTSE 100, which rebounded 1.2 per cent, or 82.2 points, to 7062.4 points.

Investors were feeling more chipper following the G20 summit, where President Trump and his Chinese counterpart Xi Jinping agreed to halt new trade tariffs for 90 days to allow for talks.

Ed Park, deputy chief investment officer at Brooks Macdonald, said: ‘This ceasefire means that the step-up in tariffs from 10 per cent to 25 per cent on $200billion of US imports from China pencilled in for the end of the year will be delayed at the very least, and this helps alleviate market fears of the trade war spiralling out of control.’

Investors across the globe had worried that a US-China trade war could knock two of the world’s biggest economies, and send shockwaves through any companies which export goods to them.

Miners, which are susceptible to moves from China due to its massive appetite for metals, rallied following the weekend.

Antofagasta led the FTSE 100, up 7.9 per cent, or 62.8p, to 863.2p, while Evraz climbed 7.6 per cent, or 34.7p, to 488.8p and Anglo American jumped 7 per cent, or 109.2p, to 1675.4p.

On the FSTE 250 index, homeware firm Dunelm shot up 14.1 per cent, or 76.5p, to 618.5p after an upgrade from Peel Hunt. Analysts at the broker said the business was ‘built on strong foundations’.

It doesn’t spend too much on rent compared to its sales, has earnings margins of more than 10pc and has low debt levels.

They recommended investors buy the stock, up from a ‘hold’ rating, and said the company’s focus on its core offering, improved branding and growing online performance should help it turn itself around following the distraction of the Worldstores acquisition.

But Stobart Group, owner of Southend Airport, slumped 11.7 per cent, or 23.2p, to 174.4p after revealing plans to slash its dividend and free up cash for expansion.

While bosses await a High Court judgement on a boardroom bust-up, the firm revealed it plans to pay 1.5p per share as its fourth quarter dividend, down from 4.5p last year.

 

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