Co-op warns of £200m coronavirus costs as profits rise

The convenience food specialist said the extra outgoings will only “in part” be offset by business rates relief and increased food sales during the pandemic.

Despite that backdrop, the Co-op insisted it would continue to “deliver sustainable growth [and] add value for members and for communities”.

The mutual’s message came as it delivered an increase in profitability during the year to January 4.

Underlying pre-tax profit, excluding the impact of IFRS16, jumped 50% to £50m. On an IFRS16 basis, however, profits inched down from £33m to £31m.

Total revenues during the 52-week period grew 7% to £10.9bn with food sales up 3% to £7.5bn.

Like-for-like food sales advanced 1.6%, as the Co-op racked up its sixth consecutive year of growth on that metric.

The mutual paid out £76m to charities and local communities during the year.

The Co-op has accelerated those efforts during the coronavirus pandemic. It has set aside more than £13m to give 56,000 workers across its food and funerals businesses a £150 bonus and an extra day’s holiday.

It has also increased the cash it will dish out to Local Community Fund causes to more than £4.5m in April alone, donated £1.5m of food to FareShare, and given food vouchers to children who would usually receive free school meals at Co-op Academies.

The business has also taken on 7,000 new workers since the start of the health emergency, offering temporary work to people who have been left without a job since the start of the crisis.

Chief executive Steve Murrells said: “The Co-op made further financial progress through 2019, showing that cooperation is working. While we didn’t know it at the time, that performance set us up well to withstand the impact of the Covid-19 crisis and to enable us to support the communities we operate in.

“No part of our business has been unaffected by the outbreak of the virus and we have played a critical role in communities throughout the UK. Our food business has helped to feed the nation and our funeral colleagues have been there for families at their time of greatest need.”

Murrells added: “Against the backdrop of Covid-19 we will review the strategy we had embedded across our businesses, aligning commercial and community objectives. Our responsibility as a co-op is to ensure that through our businesses, our wider influence is used to make the communities in which we operate feel stronger and more connected.

“That drives the business decisions we make – not profit alone and not shareholder value. The importance of that has never been so stark and we will continue to play our part for as long as we need to.”

Chair Allan Leighton said: “The Co-op is drawing deeply on our values of commercial responsibility and community concern to play our part in responding to Covid-19. Our commitment is to do all we can to help our members, customers and colleagues through the weeks and months ahead. It is already clear that Covid-19 will have profound consequences for the UK and global economy and our Co-op members and customers will not be immune.

“Looking ahead, we believe that co-operative business endeavours and cooperative ways of working will be needed in the future even more than they were in the past.”