Profits at Co-op returned to the black during the first half of the year after the group saw robust growth in its core food retail business, driven by its e-commerce activities and membership scheme.
Over the 26 weeks to 6 July, the group’s total revenue rose 1.5% to £5.6bn amid “challenging external headwinds”. Underlying operating profit increased £4m to £47m after growth initiatives in its food division helped offset cost inflation.
Meanwhile, Co-op made a pre-tax profit of £58m, compared with a £33m loss in the same period last year, helped by lower interest payments and a reduction in exceptional costs.
Food revenue was up 3.2% at £3.7bn, with the group noting that it saw strong sales across both stores and online. The unit’s underlying operating profit increased 10% to £85m despite absorbing an extra £39m in staff pay increases and a £55m investment in pricing.
Amid extensive recent media coverage about crime in the retail sector, Co-op noted that its leakage costs (theft and fraud) were up 19% to £39.5m.
The group did not publish like-for-like sales figures but highlighted that its performance was “significantly ahead” of the convenience market during the period, outperforming sector-level sales growth by 7.4% points (Circana). A key growth area was the quick commerce channel, where Co-op’s sales jumped 62% to £217m. The retailer claims that it is now the largest grocery provider on Deliveroo, Just Eat and Uber.
Meanwhile, the performance of Co-op’s wholesale division was relatively disappointing. Revenue was down 2.9% to £0.7bn, and the business made a loss of £8.0m compared to a profit of £3.0m last year. The group stated that the weaker figures were the result of a “challenging market” and its decision to make a “significant price investment” across hundreds of products to support retailers in the difficult trading conditions.
The group also noted that Nisa increased its market share by 1% to 12.9% despite operating against a contracting market. It also claimed that it had outperformed the market with a volume decline of 4.7% set against a broader market volume decline of 13% (Circana).
Looking ahead, Co-op said it was continuing to focus on growing its membership base from the current 5.5m to 8m by 2030 by creating “even more value for our member-owners”. Further expansion of its food offer is also planned, with the opening of around 120 new stores across retail and franchise by the end of 2025.
The group noted: “Our strong balance sheet enables us to navigate further external headwinds and positions us well to compete effectively in challenging markets, and pursue future growth and investment across our businesses.”
Chief Executive Shirine Khoury-Haq stated that the Co-op’s strategy was helping it gain “real momentum”, adding: “Although the external environment remains challenging, it is testament to the underlying strength of our Co-op that we have outperformed in all our markets while significantly increasing our investments in our colleagues, pricing and in the growth of our businesses.”
NAM Implications:
- Good to see a return to profit.
- But one might query the shrink quantity.
- i.e. a 1% ‘normal’ shrink level would have been £56m (£40m = 0.7%)…
- …whilst general perception has been that shop shrinkage has increased sharply following lockdown?
