Comment: Will there be appetite for a McColl’s float?

Now that the retail sector temperature can be measured in the wake of the bulk of the January trading statements, a variety of privately held retailers are considering whether to float.

Among them is convenience store group McColl’s, and it may be among the interesting candidates to go public.

McColl’s is in many ways mature. Originally a vending machine business with a presence in retail since the early 1990s, it now has almost 1,300 shops and gross sales of more than £1bn.

But it’s possible to see how growth can continue, although it will never be an Asos. Once known as a fags and mags chain, McColl’s has shifted stance away from its heritage to focus on convenience.

And in a tough food market convenience has been a bright spot, evidenced by the 18% growth reported at Sainsbury’s c-store arm. Unsurprisingly others want a piece of the action. Morrisons is racing to build scale in convenience, while Tesco is an established power.

So what would be the appeal of McColl’s when pitted against the scale and ambition of leading grocers?

Unlike Morrisons, Sainsbury’s and Tesco, McColl’s is not chasing high street locations. Instead its stores are more likely to be found on the edges of housing estates where other retailers are in short supply, catering for a customer base that lives nearby and whose choice of stores is limited.

Convenience stores now account for more than half of McColl’s estate and more than 70% of sales. Its c-store numbers have doubled over the last seven years and by Next year the target is 800.

At the same time the retailer has been improving its product offer, particularly in fresh and chilled food. Services, such as Post Offices, have also been introduced.

Over a six-week Christmas reporting period McColl’s total sales were up 2.6% and like-for-like sales advanced 1.5%. Not stellar but not too shabby. There may be appetite for a reliable dividend from McColl’s should it go ahead with a listing.