Scotmid presses on with growth plans despite hike in VAT

SCOTMID, the co-operative business, is continuing with expansion and store investment plans despite fears about the impact of the rise in VAT to 20 per cent.

John Brodie, the firm's chief executive, said its convenience food stores, fragrance outlets and its growing funerals business were "not bad places to be" if the economy in Scotland worsened.

He said: "In two years or less you will have had a 5 per cent increase in VAT. Overlay the fact you have uncertainty around the public sector and other areas - I hope I'm wrong but it is not going to be easy for a few years."

The firm announced a "robust" performance in the half year to 31 July, while it enjoyed a "substantial capital sum" on the sale of its Leith store to Tesco in April.

Turnover rose 5 per cent to 178 million, and operating profits of 4.2m compared with 4.1m in the same period last year. The firm cleared a further 3.2m profit on the sale of its biggest store in Leith, bringing pre-tax profit to 9.3m. According to the interim statement, the sale price was 5.8m.

Brodie said the firm has already re-invested some of the profits into four new small stores which opened in Dundee, Edinburgh, Glasgow and Greenock in the last six months.

Scotmid also plans to open at least two more Fragrance House outlets before Christmas. A spin off from the firm's Semichem format, the firm opened two shops before Christmas and then a third in Glasgow in June.

He said fragrance was a "strong category" for Semichem but the standalone fragrance boutiques allow them to stock a wider range.

He believes that smaller convenience stores are better suited to poor economic conditions despite selling more expensive items than supermarkets.

"You will find a price differential between a convenience store and a large 100,000sq ft store and it is generally expected in the marketplace you have to charge a higher price," said Brodie. "People are a lot more careful with their purchases.

"A positive impact should be you get less food wastage because people buy on a need-to-have basis, as opposed to walking down big aisles and adding that to the trolley.

"Life changes as well - we are all busier and the need to have it locally and now is important to people."

He added that the Leith supermarket had been "out on a limb" and that the range of Co-op products didn't "support a store of that size".

The firm also marked a growth in its funerals business, despite the fact the number of funerals has been in decline as people live longer. But the firm has grown its market share and has enjoyed a sales boost on the back of pre-planned, pre-paid funerals through funeral bonds.