Annual results from the Co-op confirm its core food business had a bumper year as consumers shopped locally in convenience stores during the pandemic. However, the society said it would only give back part of the government support it benefitted from during 2020, despite the likes of Tesco, Sainsbury’s and Morrisons agreeing to repay all the business rates relief they received.
Total sales in its Food division climbed 3.5% to £7.8bn in the year to 2 January, with like-for-like sales jumping 6.9%. The strong trading helping drive the unit’s underlying profits up 23.7% to £350m.
As well as benefitting from pandemic-related demand, the Co-op pointed to improvements in its product offering and the expansion of its online delivery activities to 800 stores. The group also opened 56 new stores and refitted a further 105.
Meanwhile, its Wholesale division saw sales increase from £1.4bn to £1.6bn and recorded a profit of £6m against a £10m loss in 2019. The Co-op highlighted that improvements in its competitiveness and own-label offering had delivered strong recruitment in the year with 624 independent stores signed up by Nisa.
Including funerals and its buying activities for other independent Co-ops, the group’s revenues increased by 5.6% to £11.5bn with reported pre-tax profits jumping from £24m to £127m.
However, the Co-op said it decided to only repay £15.5m of the money it received in Government support during the pandemic. This covers the amount it claimed in furlough payments during 2020 but not the £66m it received from the rates relief initiative early in the crisis.
Reports suggested the move follows a robust debate among Co-op board members, some of whom had argued that the mutual risked undermining its ethical stance if it did not repay government support in its entirety.
Defending the decision, Allan Leighton, the Co-op Chairman, said: “We were grateful for the government support that allowed us to manage our businesses through the pandemic, particularly our Funeralcare business, which has been working with bereaved families in extraordinarily difficult circumstances, helping them mark the passing of loved ones at a time of national grief.
“The pandemic turned our plans upside down and, while our revenues went up marginally, our costs rose disproportionately. We welcomed money from the government on the basis that it was not a loan and we would not need to pay it back – and we took business decisions accordingly.”
Looking ahead, the Co-op stated that there was “significant uncertainty” and it would continue to exercise financial prudence. It pointed to a highly competitive market and worsening consumer economy, with it also planning for further potential lockdowns.
