Morrisons propose last-minute rescue deal to save McColl’s

(qlmbusinessnews.com via bbc.co.uk – – Fri, 6th May 2022) London, Uk – –

Supermarket giant Morrisons has proposed a last-minute rescue deal for McColl's, the convenience store chain which is on the brink of collapse.

McColl's warned last night that unless it secured more funding, administration was increasingly likely.

A deal with Morrisons would potentially secure 16,000 jobs at the embattled retail chain.

Morrisons is already in a partnership with McColl's which operates more than 200 Morrisons Daily convenience stores.

The BBC understands that the aim of the deal would be to save as many stores and jobs as possible.

The improved offer, made on Thursday evening, is thought to include taking on McColl's pension commitments and its £170m debt. Morrisons declined to comment.

Morrisons has been talking to McColl's and its creditors for weeks as it aims to thrash out a rescue.

McColl's is running out of cash and needs an injection of funds to stay afloat.

The potential rescue, which was first reported by Sky News, would involve its lenders being repaid.

McColl's, which has 1,400 stores, has a wholesale tie-up with Morrisons and Martin's newsagents.

It raised £30m from shareholders last year to invest in expanding its Morrisons Daily convenience stores, but at the time it warned that footfall had been hit by the coronavirus pandemic.

Tie-up

Morrisons and McColl's signed a deal in 2017 which involved Morrisons being the convenience store chain's sole supplier for grocery products, including the relaunched Safeway brand.

This was after Morrisons' foray into convenience stores, M Local, which involved Morrisons buying up and using some of the old Blockbuster stores, came to an end in 2015.

Morrisons launched Morrisons Daily stores soon after selling its struggling M Local stores, and in 2019 McColl's started to rebrand stores as Morrisons Daily as part of its supply deal.

The Morrisons Daily stores did well, but McColl's was unable to roll them out quickly enough to counter its funding problems.

Pandemic hit

Teresa Wickham, a former director at Safeway, told the BBC's Today programme that McColl's had been “caught in a difficult place, particularly with Covid”.

She said the pandemic came at a time when the firm was shifting its business model from running traditional convenience stores to selling more fresh produce in its partnership with Morrisons.

Stores that had done this had done well, Ms Wickham said, as shopping habits moved to buying locally in the coronavirus crisis but only a small proportion of McColl's shops had made the shift.

“They didn't quite have enough fresh produce, and also at the time during the pandemic we switched very quickly to online shopping,” she said.