It may have seemed like a big deal, but for many the move by McColl’s to snap up 298 of Co-op Food’s smaller stores did not come as a surprise.
Convenience retailer McColl’s has made no secret of the fact it is hungry for growth. In fact its new chief executive Jonathan Miller, upon being appointed in March, listed a key priority as expanding the convenience business through acquisitions.
This marriage of convenience certainly ticks that box. The retailer will finish the year with about 1,300 shops – more than the 1,000 it had targeted. McColl’s would not have been able to achieve that level of growth through organic store openings alone, indeed sources have suggested it represents five years of store acquisitions within six months.
So this acquisition could clearly prove transformative for the retailer from a growth perspective in what is an increasingly fiercely competitive market.
But how do the stores fit in with McColl’s more premium convenience-led offering? The grocer updates the market next week on its half-year results and if the message is anything like that conveyed at its full-year results in March, growth will be attributed to this side of the business.
The premium offering includes a more sophisticated food-to-go proposition, including Subway which can now be found in seven stores.
“At 1,700 sq ft, how will the average newly acquired Co-op store accommodate this new premium focus, not to mention the Post Offices that it has been rolling out to some stores?”
However, at 1,700 sq ft, how will the average newly acquired Co-op store accommodate this new premium focus, not to mention the Post Offices that it has been rolling out to some stores?
Very well, it would seem. The size of the Co-op stores compare favourably with McColl’s existing premium convenience shops, which cover on average 1,600 sq ft. As such, one source indicated that the new shops will indeed be able to house a combination, and in some cases the whole spread of all McColl’s latest thinking, whether that is 250 sq ft Subway concessions or Amazon lockers.
The deal also reflects the power of the IPO, the source believes. Its listed status – it floated in 2014 – meant it was able to secure a large banking facility and is also able to raise proceeds through a share placing to fund the £117m acquisition.
And the tell-tale sign that a strategic move has paid off when you’re a listed retailer? A share price rise – and McColl’s enjoyed exactly that after releasing the news, with its shares up 18.1% over the week.
That leaves Miller sitting pretty next week for his first City outing, when he unveils the retailer’s interim figures.
- Nicola Harrison is content editor at Retail Week