Heavy rains and flooding have hit the UK over the past fortnight but convenience retailer Mills Group has been weathering a different type of storm for a lot longer. Pre-tax profit plunged 24% on turnover down 2% as poorer-performing stores, the higher minimum wage and energy costs took their toll.

It has been tough going but the clouds are parting, according to group MD Nigel Mills, who has introduced a shake-up of the business, including a huge refurbishment programme.

Mills has already sold 10 of its under-par shops and the money has been reinvested in refurbishments. It has so far revamped 20 of its 75 stores with a further 30 scheduled for this year.

Refits range from minor changes to full-blown makeovers involving the introduction of automatic doors, better lighting and new floors, ceilings and counters. Each refit will cost an average of £200,000, but Mills believes it will be money well spent.

"With change comes opportunity and we need to take advantage of this," he says. "You can't just sit still, which is why we are making changes."

The changes are not just cosmetic, however. Mills Group is also working to reconfigure its offer to reflect growing demand for fresh, chilled and, above all, healthier food.

As part of the refits it is introducing 30 metres of open-decked refrigeration into its stores - more than treble the size of its existing refrigeration units. It is also extending the length of its fruit and vegetable aisles from less than one metre to three metres.

Mills forecasts the shift to healthier foods will increase total sales by 6% a year, yet admits it will be a challenge to convince some consumers about the change of tack.

"Customers really like the new-look stores because they are clean and bright," he says.

"But some are a little wary because it is a new format. It could take as long as three years to convince people that they can now buy fresh produce from Mills Group."

The company is also using the refurbishments to address environmental issues. Individual refrigerators are being replaced with larger units that have fewer compressors and use less electricity, and movement sensors are being introduced in staff areas so lights turn off automatically when rooms are

unoccupied.

"The refits have given us the opportunity to make our stores more environmentally friendly," says Mills. "This is very much on the agenda, not just because of the benefits to the environment but because of rising energy costs. Our energy bill rose by £400,000 last year and the changes will cut energy use."

Mills has also made staff aware of the environmental consequences of handing out excessive numbers of carrier bags and they now encourage customers to reuse their standard bags or use material shopping bags.

Buoyed by this activity, Mills admits he is also on the acquisition trail. The group is aiming to open a further 20 stores in the next two years and is working with property company Christie & Co, which has begun searching for suitable sites on the group's behalf.

It also plans to meet the Post Office later this month to discuss whether there is scope for any of the 2,500 post offices up for closure to go into branches of Mills.

As many as 29 Mills Group stores already have post offices and Mills is keen to increase this because "it is a great community service that drives footfall".

The company has also unveiled plans to move into magazine distribution for the first time and intends to secure a deal to act as internet distributor for a publisher's magazines and DVDs later this year.

"It's another case of adapting to the changing retail market," says Mills. "Sales through subscriptions are increasing but sales through newstrade are falling, so the sales we are losing through the stores we can pick up through the internet."

These are all bold moves, but Mills says they are already working. Group sales are up 7% on last year at this stage and that profit is expected to be "significantly higher" than last year. So it looks as though there ­really are clearer skies up ahead.n

Topics