Convenience store chain McColl’s said it was seeing signs of recovery after being hit by product shortages but that they were still a “major constraint” after it first warned over the problems last month.

The company, which operates more than 1,000 sites across the UK, delivered the update as it reported on a “tough year” of trading thanks to COVID-19 restrictions and supply chain challenges.

McColl’s revealed that the disruption took its toll on annual sales as they fell 11% to £1.11bn for the year to 28 November.

The group, which operates McColl’s and Morrisons Daily branded convenience stores as well as Martin’s newsagents, pencilled in a decline in underlying annual profits ahead of annual financial results due out next March.

It said: “Working with our wholesale partner Morrisons, we have taken steps to improve availability in our stores.

“This includes a full review of product substitutions to address manufacturer-led product shortages, which remains the major constraint.

“With these measures we are seeing early signs of recovery, but we expect revenues to continue to be affected as we start the new financial year.”

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Chief executive Jonathan Miller said the financial year “has undoubtedly been a tough year for the business, starting with the impact of COVID-19 restrictions and ending with the widely reported and ongoing supply chain challenges”.

He added: “Although we have been able to partly mitigate these external factors, they have still had a significant impact on underlying trading.”

Shares, which received a battering when McColl’s first warned on supply issues, responded positively to the latest update, adding more than 4%.

Businesses across the globe are grappling with supply shortages as economies reopening after pandemic curbs, while Britain is also coping with a lack of workers in key roles such as HGV driving and food processing.

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