In a first-half update today, Co-op stated that the current supply chain crisis has taken a toll on its bottom line and suggested that there was greater uncertainty to come.
Over the six months 3 July, the society made an underlying operating loss of £15m, compared with a profit of £56m a year ago. Co-op started that this was due to planned investments in its staff and business as well as “significant costs, impacts on sales and profit erosion related to product availability issues and the ongoing effects of Covid”.
Looking ahead, it said: “The unplanned supply chain challenges and ongoing COVID costs will bring greater levels of uncertainty. This will in turn apply pressure on our prior expected level of profitability for year-end.”
A lack of lorry drivers and food processing staff in factories has caused significant disruption to ‘just-in-time’ supply chains in the UK, with empty shelves in supermarkets and convenience stores becoming an increasingly common issue. Earlier this month, retailers such as Iceland and Morrisons warned that the current issues will push up prices.
Co-op said today that it was likely that price rises for shoppers will continue well into next year. It also suggested that product choice would be impacted this Christmas with a limited range of pack sizes on some products.
Total revenues at Co-op were down 3.2% to £5.6bn after its core food retail business recorded a 2.8% decline against tough comparatives with last year’s bumper trading period in the grocery sector.
However, the group highlighted that total food sales were up 6.5% to £3.6bn compared to pre-pandemic levels. A key area of success for the retailer has been in the online channel with e-commerce services available in 1,000 more food stores in 350 locations in the six month period. In addition, total online food sales were around five times more than those in the first half of 2020.
By the end of 2021, 1,600 of its food stores are expected to have an online offer with 80% of the UK population covered by click & collect and 60% covered by home delivery, supported by its new deal with Amazon.
Meanwhile, the society’s wholesale revenue fell by 14% to £688m after its contract with McColl’s ended. However, Nisa saw an increase of more than 11% on sales on a two-year like-for-like basis.
Retailer recruitment also saw 316 new stores being serviced by Nisa, whilst its Honest Value range doubled the number of products compared to the initial 2020 launch.
Steve Murrells, Chief Executive of the Co-op, said: “Despite the challenges that the pandemic has presented to us, we have adapted to become more efficient and agile, which has allowed us to continue to feed and care for the nation throughout the crisis. Whilst our commercial performance has been impacted by Covid-19 and Brexit headwinds, we have responded magnificently to support our colleagues, members, customers and communities throughout.”
He added: “Covid has reinforced the fact that our vision, ’Co-operating for a Fairer World,’ has never been more relevant, as well as showing us the areas in which we need to move quicker. As we look ahead, we will continue to advocate the power of co-operation so that as we emerge from this crisis, we are able to empower and lift people up with us.”
