Mccoll's Retail Share Discussion Threads

[ntv] 27/8/2018 18:28

not invested here ,but on the watch list
Morrisons take over could be the only hope
These management teams always seen to take a step to far

[ed 123] 27/8/2018 17:25

Yes, Morrisons would have the operational ability and buying power to make a success of McColls stores.

Market cap of McColls c. £150 million. Net debt £142 million. Payables minus receivables and inventories c.£50 million. Total enterprise value c. £342 million for 1,600 shops = about £214,000 per shop. (Please check my figures.)

Prices vary of course, but, nationally, newsagents are selling for say, £15k to £50k. Convenience stores vary even more, perhaps £20k to £700k. McColls paid £392k per Co-op store.

Very ball park and I don't know the McColls estate. Just my own rough thoughts.

[loganair] 27/8/2018 16:50

One hope I've stuck with is for Morrison's to buy McColl's out and turn them in to Safeway's while at the same time getting rid of all of McColl's newsagents.

This is what I would like to see for McColl's to close the majority of their newsagents as they are far too small to take on the other supermarkets.

[ed 123] 27/8/2018 16:40

Yes, Co-op stores gave a substantial increase in the number of outlets but, unfortunately, it will be damaging if they can't at least hang on to the existing customers/revenue.

Estonia's richest man? The other side to that is the person who knew the business really well (James Lancaster) sold his remaining 10% holding at 295p.

Also, Lancaster and Miller made over £20 million each in the float in 2014.

Genuinely hope McColls thrives but the Co-op buy may be Miller realising the rising cost base and tough competition would move the plc backwards unless he could upscale quickly.

[loganair] 27/8/2018 16:05

The Reason McColl's gave for buying the Co-op stores was to be able to substantially increase their number of out lets in one go and were also slightly bigger than the average Martin's.

I'm still wondering why the richest man in Estonia bought a nearly 10% stake in McColl's at around 275p? as he's seen his investment half in value in around just 1 year.

[ed 123] 27/8/2018 16:00

Thanks, Loganair.

My view, belatedly, is that the 298 store Co-op buy was a mistake. McColls should instead have bought a series of one-off independents. Then, there presumably wouldn't have been a dip in either quality or price under McColls. Consequently, existing clientele would have continued shopping there, and the plc would have gained from the increasing scale of the operation.

[loganair] 27/8/2018 15:48

I have a Martin's down the road, was an original Forbuoy's, has a Co-Op next door but one and a Waitrose across the road.

When I was at school a good number of years ago, this shop was very busy, now days it is virtually empty and closes at 18.00 while the Waitrose closes at 20.00 and Co-Op which has the local post office at 23.00.

This Martin's is the smallest shop in the parade and deosn't sell anything that either the Co-Op or Waitrose also sells and if I was McColl's I would close this shop once the lease expires.

[ed 123] 27/8/2018 15:19

That sounds encouraging, Loganair.

Hopefully, the business is performing as well as the above piece suggests.

Very small sample size but, having experience of two stores (one now McColls but formerly one of the 298 Co-op stores and one a long held Martins newsagents), I sold my remaining shares.

I'd visited the former Co-op a few times when it was a Co-op and later after the transfer to McColls. Under McColls the prices were higher and the quality was poorer. I spoke to someone very senior at McColls, who said they were aware of this and were addressing it. Roll on a few months and I revisited the same shop. This is not hyperbole, there were hardly any products on the refrigerated shelving, lots and lots of empty spaces, and a few products on their expiry dates with reduction labels. The packets and cans produce was fully stocked but prices were not attractive. At that point I sold half my remaining shares. I went back 4 days later and was shocked to find exactly the same thing. Spoke to one of the staff, who said they were having refrigeration trouble. I pointed out that it was the same 4 days ago and strange to have fridge trouble affecting half a dozen cabinets at the same time. He then opened up that they were having trouble getting supplies. Head Office had told them the food was in the warehouse but they didn't have enough drivers. I spoke to a shopper, walking past. She said she used to use it when it was a Co-op but doesn't even look in any more, walks another 100 yards to a Sainsbury Local and shops there. There's also an independent convenience store close by. When I got home I sold the last of my shares. With thin margins and strong competition, McColls needs to be at the top of its game operationally. What I saw was pitiful.

In a different region, the Martins newsagent is located 3 doors away from a larger Co-op. The two shops had co-existed for some years, not really poaching off each other. More recently, though, the Co-op moved into selling newspapers, magazines, greetings card, and Martins started stocking some food, including a fridge with milk, cola and other chilled products. The Co-op is very busy but Martins is quiet. Thankfully, Martins has a mini post office. However, most people entering the shop go straight to the post office counter, do their business, and then go straight out again. The Martins shop side is very quiet. The Co-op is easily winning this battle. Is the post office side enough for Martins here? I don't know.

As I said above, very small sample size but, bearing in mind the much higher gearing following the buy of the Co-op stores, I decided this was too risky for me.

Apologies to holders.

Does anyone have better experiences? I was a bit hesitant to post this negative report without being able to give it some positive balance. It would be good to read something more positive. Anyone else?

[loganair] 27/8/2018 12:13

The new supply link-up between Morrisons and 1,300 convenience stores operated by McColl’s has been completed three months ahead of schedule.

Fresh and ambient products, including branded lines and 400 Safeway own-label products, are now being distributed to all the chain’s outlets – apart from 300 outlets served by Nisa.

Jonathan Miller, chief executive of McColl’s, said: “The accelerated roll-out was a great achievement by both the McColl’s and Morrisons teams, and it enables us to move through the second half of the year with a progressively stronger, simpler and more secure supply chain.

“We are particularly excited by the relaunch of the Safeway brand and early feedback has been excellent, with customers benefiting from the higher quality and competitiveness of the fresh and ambient products available. Looking ahead, we will now focus on firmly establishing Safeway with our customers as well as exploring opportunities to develop the range further.”

Following the introduction of Safeway brands, the convenience retailer has increased sales of free-range eggs by 48% while own-label minced beef volume is up 68%.

The supply rollout to 1,300 outlets started in January 2018 and was scheduled to be completed by the end of November. A further 300 McColl’s outlets were bought from the Co-op in 2017 and will be supplied by Nisa until 2020.

[ed 123] 21/8/2018 16:09

Chart looks like it may be forming a bottom.

Notwithstanding that, I sold my last ones yesterday.

(Posting for transparency, as I'd previously posted more optimistically.)

Hope it goes well for holders.

[josephrobert] 20/8/2018 07:50

I was one of the lucky ones, by buying low and selling high.

Now back in @ historic lows.

My thoughts are the big picture is intact i.e.low risk business, where have scale and a decent supplier which should provide more things of what people want and in return more margin and turnover. While there appeared to be some issues to deal with, the business is still the broadly the same but the price isn't. I feel that it will work to my advantage once again.

GLAH

[loganair] 08/8/2018 21:51

I understand that McColl's have been slowly reducing the number of news agents by either selling them off or closing them.

I think the confusion with the number of stores is that McColl's are putting in Safeway products in to 1,300 of their 1,611 stores.

[she-ra] 08/8/2018 21:20

WUNDERBAR - Do you remember Alldays? I do.




BTW I'm not saying the same will happen here but the retail environment isn't great right now.

[wunderbar] 08/8/2018 20:11

Logonair - how about Estonia's richest man buying the other 90%. If he thought 275p was a good price I wonder what he thinks about 132p!

[wunderbar] 08/8/2018 20:03

Hi Danny, it's certainly a dark time for the shareprice and I sincerely hope we don't see 120p anytime soon (but I've learnt from past experience to never underestimate the brutality of the market). So, where will this bottom out - hopefully not far from where we are now. In my opinion the rate at which this is falling is not sustainable and I'd expect to see some stability/reversal soon. Afterall share price has fallen 12% in a week, 38% in a month, and 48% in a year.

You mention the slump in newspaper and magazine buying but this has been a somewhat predictable decline for many years and I can't believe McColls are overly reliant on this, besides I thought they were focusing more on food produce hence last years tie-up with Morrisons under the Safeways brand. As for a potential writedown in goodwill that wouldn't surprise me.

According to Hargreaves Lansdown website, as of two weeks ago, three brokers had price targets ranging from 190 to 250p, average being 225p. At 132p there appears considerable upside from here - but I fully acknowledge broker estimates can turn out to be utter tosh. To be clear I haven't bought on a broker recommendation - more a hunch this is oversold.

On a final note, I previously said MCLS had 1300 stores, in fact they have 1650 according to their website. They have one of the largest estates in the uk convenience sector. I bet Sainsbury / Tesco would love to get their hands on some of these stores. Cue ramp....MCLS takeover target!

[she-ra] 08/8/2018 19:22

A large estate can become a liability when profitability turns to loss making.

[loganair] 08/8/2018 18:16

Can you believe it, Estonia's richest man bought a near 10% stake in McColl's for around 275p per share less then a year ago.

[danny baker] 08/8/2018 18:01

Investors are heading for the door due to concerns over the underlying business model. There has been a slump in newspaper and magazine buying cutting into McColls'core business. The growth in Tesco Express together with a much improved Co-op offering as well as petrol stations upping their game has meant the convenience store sector has become cut throat with McColls in the weakest position. Before you buy any more shares you should visit a dozen McColls shops and work out from the customers you see there and what they are buying how much you'd value the shops at. My view is the goodwill in the balance sheet will have to be reviewed downwards weakening the balance sheet further. Ok maybe by Ftiday afternoon you'll be able to buy shares at 120p but it still doesn't make them good value.

Only my first post. I am a refugee from the old iii board but have followed the comments on advfn for a long time.

[wunderbar] 08/8/2018 16:23

I've decided to join the party by making some purchases over past week ranging from 134 to 150p. Must confess MCLS only caught my eye when I saw it appear on biggest losers list a few times, peaked my interest and reeled me in. Having done some very loose number crunching I believe the shares are oversold @ 132p. The Palmer & Harvey collapse was a one off so won't impact future profits (funny enough another of my holdings IMB Imperial Brands took a £100m hit on P&H - and they've subsequently recovered quite nicely).

Anyway, back to some very basic numbers. First thing to mention is market cap now only £152m - MCLS payed £117m for 298 former Co-op stores (completed July 2017), given they now have 1300 stores are we lead to believe the market is valuing the rest of the estate c1000 stores at just £35m! I dare say MCLS paid too much for the co-op stores (as seems to be the case with most corporate acquisitions), by how much though? Then there's the business itself, the market doesn't seem to think much of it judging by the hammering over past few weeks. MCLS really shouldn't struggle making £20m per annum, p/e now under 8 - given the potential looks too cheap. As for the divi (c8%) this is significantly increasing on a daily basis as share price continues to slide - something's gotta give.

As I say, I think this is oversold, it's been given a damn good kicking of late and I'd expect a reversal of fortune pretty soon. Anyone care to comment?

[davr0s] 02/8/2018 13:18

In fact if your sad enough to look you will see that I said I was out on a post 136d ago - but maybe you won't believe that post either

[davr0s] 02/8/2018 13:15

I couldn't care less whether you believe it or not - I know what I did

[pj fozzie] 02/8/2018 10:42

I'm curious, Eastbourne, why you wouldn't take DavR0s comment at face value?

Cheers,
PJ

P.S. To keep on topic - I'm currently of a mind to top up my holding of MCLS - I think I hold a very similar view to Ed 123 on this stock.

[eastbourne1982] 02/8/2018 09:35

Of course you did DavROs.

[davr0s] 31/7/2018 17:46

2 year low = bearish. Cheap can always get cheaper. I traded it this time last year exited for a decent profit. Wouldn't consider touching it at the moment

[john09] 31/7/2018 17:43

Woah this is cheap now