Co-op profits plunge as supply chain disruption takes toll

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The Co-operative Group has reported a steep fall in annual profits after its performance was hit by “food supply chain disruption during system transformation”.

The Co-op said it expects to face “continued challenges” this year, “including the final implementation of the business transformation in food, current inflationary pressures and the economic uncertainty facing customers, members and colleagues”.

Group revenue edged down year on year to £11.2bn in the year to January 1, 2022. The grocer said that reflected unprecedented Covid-related sales in 2020 of £11.5bn, supply challenges and disruption resulting from work to adapt to “an increasingly multichannel model”.

Pre-tax profit came in at £57m – down £70m on last year and boosted by a one-off gain of £99m from the early settlement of a liability owed to the Co-operative Bank. Profitability was up £33m on 2019.

Underlying operating profit plummeted to £100m from £235m, “reflecting increased investment in colleagues and businesses” as well as the supply chain issues in the second half.

Despite the uncertain outlook, the retailer said that “food sales have outperformed the market in the first quarter, following availability improvements and focus on value”.

Interim chief executive Shirine Khoury-Haq, who succeeds Steve Murrells at the AGM, said: “The Co-op is a business designed for the long term and that is the path we are on.

“The last year has seen us facing some significant challenges, including significant supply chain issues in the second half coming at the same time as our food business transformation and increasing inflationary pressures.

“The difficult operating environment disproportionately impacted our food business, given its focus on the community convenience market, with an operating model that is more reliant on flexibility in the supply chain.

“The Co-op remains uniquely positioned. We continue to be driven by our vision of co-operating for a fairer world and have a platform of businesses in the right markets to drive change and get closer to our members, customers and communities.

“The significant investment we have made across our business in recent years now provides the basis for us to move forwards in a more efficient manner.”