The Co-op has warned its profits are likely to fall in the year ahead as the food to funerals group expects the “turbulent economic headwinds, including inflationary pressures” to continue.
While that “volatile external environment” contributed to an 11% fall in profits at its grocery arm, the mutual said underlying operating profit across the business had remained steady at £100m.
However, pre-tax profits had soared to £247m in the year to 31 December from £57m a year before, thanks to a one-off profit from the sale of its petrol forecourts business to Asda in October and a strong performance by its funerals and legal business.
Sales for the group rose 3% to £11.5bn, including a 1.3% rise at its grocery business, where the volume of goods sold slid back as shoppers put fewer items in their baskets amid high price rises on food and other bills and some availability problems for the group as result of IT glitches in the first part of the year.
Sales and profits at the group’s funeralcare and legal businesses rose strongly as the group took market share from rivals amid a death rate that remained at higher than historical average levels for most of the year.
Shirine Khoury-Haq, the chief executive of the Co-op, credited the group with “a robust performance in what has been a difficult and disruptive trading year for many businesses”.
She said profits had been underpinned by £101m of cost savings, including some job cuts at head office last year, while the group cut its debts to £330m from £920m after the sale of the forecourts business put it on a more sound financial footing.
Khoury-Haq said profits in the year ahead were likely to fall as the group was facing energy costs that were as much as double that of previous years while labour costs had also risen sharply.
“We, along with many others, fully expect the challenging external conditions to continue throughout 2023. High levels of inflation are predicted to continue until at least mid-year, before beginning to fall, and a recession, both here in the UK and globally, remains a significant possibility,” she said.
“We are committed to doing all we can to shield members, colleagues and customers from this, and other rising costs, as much as we possibly can.”
after newsletter promotion
Allan Leighton, the chair of the Co-op who is to step down in February next year when his nine-year term ends, said: “We are of course not immune to the stark realities facing all consumer-led businesses, with soaring energy and other inflation related costs continuing to weigh heavily on short-term expenses and operating profits.
“The actions we have taken already have provided us with the ability to weather this over the short-term and to capitalise more fully over the longer term.”
The Co-op said it had already begun searching for a successor to Leighton and several other board members who are due to step down.
