McColl’s Takes Piece Of Stock Market Pie

Retailers keen to take advantage of rising consumer spending.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 27 January, 2014 12:12 pm GMT

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McColls Retail Group today announced its intention to float on the London Stock Exchange. The convenience store and newsagent rushed ahead of as many as 15 other companies, including Appliances Online, Pets at Home and Boohoo.com, all thought to want to join the stock market. Combined, these retailers have a potential value of £6 billion.

Britain’s economic recovery appears to be underway, with consumer spending (which accounts for two-thirds of the UK’s economic activity), driving growth. In the third quarter spending rose 0.8% to its highest level since 2010.

The private equity owners of retail chains want a piece of this. McColl’s, which operates 1,276 stores across the UK, is planning to raise £50 million through the float to reduce its level of borrowings. The announcement arrives after McColl’s posted a 2.2% year-on-year sales rise to £870 million with profit rising to £211 million.

The group is aiming to extend its portfolio to around 1,350 stores – through acquisitions – by the end of 2016.

McColl’s has a potential value of £225 million and is owned by chairman James Lancaster and private equity firm Caird Capital. While the floatation is expected to be completed by the end of February, McColl’s are merely the first of many, so as an investor it may pay to be choosy.