The UK’s Co-operative Group has warned that profits are likely to fall this year and it expects inflation to remain high until the next.
The company, which has grocery, funeral, insurance and legal divisions, reported flat underlying profits of £100mn and an increase in sales of £300mn to £1.5bn in 2022.
It said it expected inflation would “dampen profitability in the short-term” and noted that more expensive energy and higher wages had already cost it £100mn.
Group pre-tax profit was up by £190mn to £247mn during the period, thanks to a one-off profit of £319mn from the sales of its petrol station business to the Issa brothers, who co-own rival supermarket chain Asda.
“We do expect inflation to continue for most of this year, we hope it will settle by the end of the year,” said interim finance chief Mike Hazell.
Chief executive Shirine Khoury-Haq said the group was on a sound financial footing despite the continuing uncertainty. Net debt was down to £333mn, from £920mn in 2021.
The Co-op said more people were opting for cheaper direct cremation and burials, contributing to a £7mn increase in sales to £271mn in its funeral business. Sales at its supermarkets rose £134mn to £7.8bn but shoppers bought fewer items.
The group is jointly owned by individual members and independent co-operative societies. It has 4.41mn members and said on Wednesday that it hoped to attract a further 1mn over the next five years.
Chair Allan Leighton, who will step down in February after nine years, 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.”
