(Alliance News) -Â Wm Morrison Supermarkets PLC and McColl's Retail Group PLC on Monday said they are extending their wholesale supply partnership.
Over the next three years, 300 McColl's convenience stores are to be converted to the Morrisons Daily format. The stores will offer a full Morrisons convenience range and will be branded Morrisons Daily, but will continue to be owned and operated by McColl's.
Morrisons and McColl's have extended their partnership by a further three years, with Morrisons now to act as McColl's sole wholesale supplier for its estate of over 1,200 stories out to 2027.
"Today's agreement is another example of Morrisons extending the reach of our popular brand. In doing so, we are building a broader, stronger Morrisons for customers, and leveraging our existing assets to achieve capital light, profitable growth," said Morrisons Chief Executive David Potts.
McColl's Chief Executive Jonathan Miller said: "Despite the challenges presented by Covid-19, the new partnership represents another significant step forward in achieving our strategic goal of increasing our fresh food offering in our store estate, while offering the best value for money for our customers."
Convenience store chain McColl's separately added that existing banking arrangements have been amended to offer improved headroom against financial covenants, a realigned amortisation schedule and an extended maturity date to February 2024. The updated facility consists of a GBP100 million revolving credit facility and an amortising GBP67.5 million term loan.
Further, McColl's said strong demand for its local convenience offering led to like-for-like sales growth of 7.9% for the 12 weeks to February 21, while a shift in the pattern of trade away from higher-margin "impulse categories" continues to generate lower gross margins overall.
"Looking ahead, the significant uncertainty over the macroeconomic and consumer environment, make it difficult to accurately forecast sales patterns and margin mix changes. However, as lockdown restrictions ease through the course of the year, the company would expect the sales mix to normalise," said McColl's.
Shares in McColl's were up 7.6% at 25.60 pence in London on Monday, while Morrisons was up 0.4% at 171.50p.
By Lucy Heming;Â lucyheming@alliancenews.com
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Mccoll's (MCLS)