Scotmid co-op reveals consumers’ belt-tightening has hit bottom line

CONVENIENCE store chain Scotmid has seen its profits plunge almost 40 per cent as hard-pressed customers struggle with tightening household budgets.

Chief executive John Brodie said the company’s Semichem discount health and beauty chain had also been hit by the downturn in trading, particularly in Northern Ireland, where the economy is heavily reliant on the public sector.

Brodie told The Scotsman: “Customers are only buying the essentials. We’re in a different environment to this time last year, so our expectations are different. I don’t foresee an improvement in the second-half of the year or for some time after that. But one of the advantages of being a co-op is that we can build the business for the long-term.”

Scotmid – the Scottish Midland Co-operative Society – is owned by its members, who can join for £1 and are made up of “everyday shoppers”.

Unlike the Manchester-based Co-operative Group – the UK’s fifth-biggest supermarket chain – Scotmid does not pay a dividend to its members but instead re-invests surplus cash into its business, distributes it to community groups and issues discount vouchers, with offers such as “spend £10, save £5”.

Scotmid and the Co-operative Group work together with other co-ops in the UK to operate the Co-operative Retail Trading Group (CRTG), which acts as a buying group for the businesses.

Brodie said Newbridge-based Scotmid was “sharpening its prices” to try and entice customers into its stores, with some of the discounts negotiated through the CRTG. But he warned other offers would eat into profits.

Yet Brodie said that closing stores was “not on the agenda” and he would open “a handful” of shops during 2012.

Scotmid bought Blantyre-based convenience store chain Botterills in November. Brodie said that work was continuing to integrate Botterills’ 51 shops – which traded under the Spar brand – into the Scotmid group but, once that work was complete, he already had several sites earmarked for further stores.

Operating profits fell from £4.2 million to £2.6m in the six months to 30 July on turnover up by £32m to £210m following the Botterills deal, but pre-tax profits dropped from £9.3m to £943,000. The previous year’s profit had been distorted by nearly £6m of proceeds from the sale of Scotmid’s large Leith store in Edinburgh to Tesco.

The group already has 190 Scotmid food shops in the Central Belt and up the east coast, along with a further 140 Semichem branches spread throughout Scotland and Northern Ireland.

The society was formed in 1981 by merging the St Cuthbert’s and Dalziel co-operative societies, which traced their roots back to 1859 and 1863 respectively.