Co-operative retailer Scotmid today reported a 7 per cent dip in annual profits amid “lacklustre” trading conditions, pressure from wage costs and “unprecedented” political upheaval.
But the Edinburgh-based group, which traces its roots back to 1859 and operates more than 300 retail outlets, insisted it had turned in a “strong” underlying performance as turnover for the 12 months to 28 January rose to £376 million, up from £370m a year earlier.
Trading profits came in at £5.3m, down from £5.7m last time, with the mutual pointing to Scottish Retail Consortium figures showing an average decline in like-for-like sales of 0.8 per cent for the wider sector during the year to January.
Chief executive John Brodie told The Scotsman: “To finish with a result not far short of last year is a good result. Our food business performed well, driven by innovation in terms of both sales and control of costs, and I’d particularly highlight food-to-go as an area of growth.”
He added that Theresa May’s surprise move to call a general election for 8 June will add to the short-term political uncertainty, “but if it brings longer-term certainty – whatever the outcome – that’s what businesses crave so they can plan for it”.
I expect this political and economic uncertainty to continue in 2017John Brodie
Brodie said that the group’s 100-strong Semichem health and beauty chain continued to find itself operating in a difficult retail landscape, with increased competition hitting sales and pressure on the cost of imported goods due to Brexit-battered sterling, although this has given a boost to many of its 25 stores in Northern Ireland as shoppers from the Republic crossed the border to cash in on the weaker pound.
He added: “It’s not enough to offset the cost of goods for the entire business coming in from Europe, but it certainly helped.”
Scotmid’s property arm enjoyed a “very positive year thanks to domestic property rental income growth driven by investment and specifically a successful lease renewal of one of the society’s main commercial properties”, Brodie said, while its funerals business, which is heading into its 90th year, “continued to grow and respond to increased local competition”.
Following last year’s introduction of the national living wage, which this month rose from £7.20 an hour to £7.50 for those aged 25 and over, Brodie said that Scotmid had responded by accelerating its efficiency initiatives during a year that saw “unprecedented uncertainty influenced by the Brexit referendum and the US election result”.
He added: “I expect this political and economic uncertainty to continue in 2017 as the United Kingdom negotiates the terms of exit. Additionally, the ongoing cost challenge of the national living wage will be magnified by further costs arising from the apprenticeship levy and the recent rating revaluation.”
Although he expects 2017 to be “another challenging year”, Brodie said the group would continue to develop its food-to-go offering, “which is a small but growing part of our business, and we’ll continue to focus on the other core areas within food”.
“We have a programme of refits and investment in the business, and last year we spent around £10m across the society – we’re anticipating we’ll spend a similar or even larger sum in the coming year, to keep the society moving forward in these difficult times.”