Conviviality half-year performance hailed by analysts

Bargain Booze owner Conviviality posted modest like-for-like retail sales growth of 0.4% in the first half of the 2017/18 financial year.

The retail performance was hit by dwindling tobacco sales and growth excluding tobacco was 2.3%, while overall franchisee gross margin increased 0.8%.

The group, which also owns Wine Rack and Thorougoods, opened 22 new stores in the past year, leading retail sales to grow 10% compared to the corresponding prior period.

Overall Conviviality – which includes Conviviality Direct, Conviviality Retail and Conviviality Trading – saw revenue increase 9.2% to £836.3 million.

Gross margin was down 0.3% to 12.5% in what the group said was a concerted decision to increased sales to large national account customers in H1 FY18.

It acquired 1,408 new on trade customers, while more than 2,400 customers – including 84 national accounts – increased their purchases from Conviviality year-on-year.

Chief executive Diana Hunter said: “Our customers and franchisees have continued to recognise the strength of the Conviviality proposition and the opportunities a single supplier and distribution solution affords them. This has been evidenced by our above market growth in both the on trade and the off trade during the period.

“We have made deliberate choices to successfully grow market share and enhance the quality of future earnings by agreeing long term contracts with our larger customers and securing new national account customers. These gains in market share coupled with our continued strong sales demonstrates our competitive advantage, the broad customer base we have developed and the robust nature of Conviviality as the UK’s leading drinks wholesaler, distributor and solution provider to our Customers.

“As previously highlighted, cost initiatives for the second half of the current financial year provide confidence for both achieving current year board expectations, as well as the group’s longer-term performance.”

Analysts at Investec called it a “strong trading performance, well set to meet expectations”, adding: “We view Conviviality as a multi-year growth story that can deliver market share gains through its nationwide scale and one-stop shop model. Trading demonstrates market share gains in our view, with Direct particularly pleasing in our view.

“Growth continues to be driven through new outlet wins and increased sales / outlet as customers continue to embrace Conviviality’s one-stop shop approach, evidenced by new long-term supply agreements with some of its largest customers.”

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