The Co-operative Food

Financial overview

• Group sales fell 1.9% to £11,262m in FY2023 
• Retail food sales slid 7.0% to £7,262m 
• Online food revenues jumped 40.1% to £311m 
• Underlying operating profit improved from £83m to £97m 
• Pre-tax profits fell to £28m, although up £79m on the previous year excluding the sale of its petrol forecourts business 
• For latest financial update, click here

The Co-op reported a 1.9% decline in group sales, which includes its insurance and funeral businesses, to £11,262m for the 53-week period ended 6 January 2024 (FY2023). 

Co-op chief executive Shirine Khoury-Haq commented “Our relentless focus on strengthening our financial position has enabled us to navigate a highly turbulent external landscape, delivering increased value for our member-owners and planning for a future with confidence and with membership firmly back at the heart of our business.”   

Retail food sales fell 7.0% to £7,262m driven “primarily by the sale of the petrol forecourt business”. Revenues climbed 4.3% excluding the impact of the petrol forecourt sale. 

Online food sales continued to gather pace, jumping 40.1% to £311m with the retailer securing the top position in the quick convenience market in the second half of the year (according to Nielsen data).  

Co-op had hailed a “credible” set of results in FY2022 against a challenging backdrop. Revenues had moved ahead, while profitability received a boost from the sale of its petrol forecourts business to Asda in October as well as significant cost reductions as it battled soaring inflation.     

Retail food sales had edged up 1.7% to £7,810m in FY2022, against £7,670m the year prior, which had included two more months (or around £150m of sales) from the forecourts business. After two years of declines, like-for-like food sales had risen 3.2%.   

Overall group revenues had climbed 3.0% to £11,484m in FY2022, up from £11,151m the year before.   

The Co-op restated statutory comparative figures for FY2022 to reflect the new accounting treatments for funeral plans under IFRS17. FY2023 onwards is accounted for on this basis. 

Underlying operating profit rose £14m to £97m in FY2023 which Co-op said was “all the more impressive given prior year includes earnings from the petrol forecourt business disposed of in 2022”. 

The retailer posted statutory operating profits of £66m in the latest financial year, a “material improvement” on the prior year loss of £12m. Co-op said this reflected “the underlying operating profit improvement combined with a much reduced level of non-underlying charges”.  

Pre-tax profit tax came in at £28m for the group in FY2023, “significantly lower” than last year as the comparative period included a £319m gain on the sale of its petrol forecourts. Excluding the £319m, group pre-tax profit climbed £79m on the previous year. 

Bolstered by a net gain of £319m on the forecourts’ sale, group pre-tax profit had more than trebled to £268m in FY2022, raising net margin from 0.5% to 2.3%. Pre-tax profit had more than halved to £57m in FY2021, which management said reflected supply chain issues, investment in people and its system transformation during the second half.   

Net debt continued to fall in the latest financial year, down to £82m.  Co-op had reported a £587m reduction in net debt to £333m in FY2022, down from £920m in FY2021, as it focused on building cashflow, with cash generated from operating activities increasing from £178m in 2021 to £455m.  

Since acquiring Nisa in 2018, Co-op has continued to develop its wholesale business.  

Driven by Nisa, the wholesale arm rose 2.8% to £1,480m in FY2023, having recorded a 3.8% increase in revenue to £1,439m in FY2022, where it signed up a further 475 independent stores as franchising grew to an important part of Co-op’s strategy.  

Wholesale revenue had fallen back by 12% in FY2021 as customers returned to eating out following the pandemic.  

UK sales and like-for-like sales analysis 

UK sales on Retail Navigator refer to Co-op’s retail food business, which had been going from strength to strength ahead of the pandemic.   

Yet food sales fell 7.0% to £7,262m in the latest financial year.  Co-op saw lower volumes in its food business for much of the year as customers “continued to adapt their behaviour and shopping habits” in light of the cost-of-living crisis.  Excluding the impact of the sale of the petrol forecourts, food sales climbed 4.3% year-on-year.  Like-for-like food sales increased 4.7% year-on-year, having risen 3.2% in FY2022. 

The retailer had returned to growth in FY2022, with total food sales rising 1.7% to £7,805m despite the loss of around £150m of sales generated by its forecourt shops following their disposal in October. The comparative period also included the impact of the third national lockdown at the beginning of 2021, which had bolstered sales.   

While the number of weekly transactions increased by 5% to 16.4 million in FY2022, this was offset by a reduction in basket size as customer behaviour shifted due to the cost-of-living pressures. In response to this, the retailer invested £37m in prices across its most popular products in the final quarter.   

Within its food retail division, operating profits rose from £54m to £152m in FY2023 with EBITDA growing from £385m to £466m. 

Ecommerce sales performance 

Ecommerce sales within its food division (accounted for here as UK online sales) jumped 40.1% to £311m in the latest financial year. The retailer expanded its partnership with Just Eat to over 1,000 stores, aiming to grow from 23% currently to capture 30% of the overall quick convenience market share in the next four years. 

The online channel had continued to perform well in FY2022, with online food sales rising 24% to £222m as Co-op continued to ramp up its online offensive.   

By the end of 2022, online delivery services had been rolled out to 1,800 individual food stores across 859 locations, making it available to 81% of the UK population, against only around 55% at the end of the previous year.   

The online channel had also been the standout performer for Co-op in FY2021, when ecommerce revenue more than doubled to £179m (from £70m in FY2020 and £4m in FY2019).   

UK stores financial analysis 

Co-op provides its overall food sales area in its annual report, with Retail Navigator using these figures to calculate overall sales densities for the retailer. 

Sales densities fell to an estimated £915 / sq ft in the latest financial year, given the overall decline in food sales and the rise in online performance.  

Densities had reached £985 / sq ft in FY2022, rising considerably from £905 / sq ft the year prior. At the current level sales densities for the Co-op remain lower than those achieved by the other leading grocers.  

Market share

Co-op’s grocery market share fluctuates around the 6% mark, depending on particular competitive pressures and the time of year. 

 

The Co-op’s market share peaked at 7.4% in the 12 weeks to mid-June 2020 as shoppers stayed close to home and made use of its home delivery services during the coronavirus pandemic.

Current year

H1

Group sales at the Co-op edged up 1.8% to £5,600m in the 26 weeks ended 6 July 2024 (H1 FY2024).  

Active members increased from 4.6 million to 5.5 million, with the retailer “firmly on target” to reach 8 million members by 2030. 

The group returned to profit at the pre-tax level, delivering pre-tax profit of £58m versus a £33m loss the previous year.  

Co-op chief executive Shirine Khoury-Haq, Chief Executive of the Co-op, said: 

“We have delivered a strong performance for the first six months of this year as our strategy starts to gain real momentum.   Although the external environment remains challenging, it is testament to the underlying strength of our Co-op that we have outperformed in all our markets while significantly increasing our investments in our colleagues, pricing and in the growth of our businesses. 

“While there is much more for us to achieve, we are on track to reach our goal of 8 million Co-op member owners by 2030.  This confidence is supported by a strong balance sheet, a clear business strategy, a compelling vision, and 55,000 amazing Co-op colleagues who are central to our achievements over the last six months.” 

Food Retail performance 

Sales within its Food Retail division climbed 3.2% to £3.7bn in the period, with strong sales in both its stores and online. Sales volumes grew 2.5% while inflation slowed. 

Underlying operating profit increased 10% to £85m, which was inclusive of absorbing £39m in colleague pay increases as part of its commitment to the Real Living Wage, and £55m in pricing, £34m of which was specific to members.  

Quick commerce sales grew 62% from £134m to £217m in the half.  The retailer said it is now the largest grocery provider on Deliveroo, Just Eat and Uber. 

Co-op Food Retail managing director Matt Hood commented “We’ve started 2024 on a strong note, marking the second year of our Pure Convenience strategy. In building on the solid foundations we initially laid, we are now embracing more innovative approaches.  

“We aim to deliver convenience without compromise, offering high quality products that you, our member-owners, want and need. We continue to invest in the prices of our most shopped products and reward you with exclusive prices and promotions, to help you manage household costs.” 

Forecast 

Co-op has an opportunity to carve out a niche with its community and sustainability focus and ongoing investment on convenience and value. It has re-invigorated its membership scheme through the launch of ‘Member Prices’ as well as expanding partnerships with Uber Eats. 

Retail Navigator expects it to continue to expand on the progress made, with grocery revenue expected to be nudging near £9bn mark by FY2028.  Online food sales are forecast to reach well over £500m by FY2028.