(Reuters) - British wholesaler and convenience retailer Nisa Retail said on Monday it would provide a new short-term contract to its member McColl's Retail Group to help it ensure continuity of supplies after the collapse of Palmer & Harvey (P&H).
P&H, the UK's largest tobacco distributor which also delivers food and drink to supermarkets, went into administration last week after running out of cash, raising the possibility of tobacco shortages across the country.
Analysts said McColl's was relatively well-placed to deal with the situation but could face additional costs.
The new contract starts on Monday and covers McColl stores previously supplied by P&H, Nisa Retail said in a statement, adding that the stock would be delivered through existing Nisa-supplied McColl stores.
Earlier McColl's said it had "a contingency plan already in place to ensure continuity of supply to the around 700 newsagents and smaller convenience stores, previously supplied by P&H, within our estate of 1,611 stores".
McColl's also said that revenue for the 52 weeks to Nov. 26 rose by 19 percent after the integration of 298 acquired convenience stores.
In August McColl's signed an agreement for WM Morrison to supply its convenience stores and 350 newsagents starting in 2018.
Liberum analysts rated McColl's as "buy".
"There are short-term risks relating to Palmer and Harvey's fall into administration, which need to be watched, but we believe McColl's is better placed than many of its competitors to deal with the situation," the analysts said, stressing the retailer's strong ties with suppliers of scale.
But analysts also pointed to added costs, potential working capital increases and availability issues as McColl's seeks to maintain availability in the stores previously supplied by P&H.
McColl's stock was down 1.7 percent at 285 pence at 0955 GMT.
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by David Goodman and Gareth Jones)