Scotmid sees no recovery as profits fall again

PRICING pressures and a drop in the dividend it receives from the Co-operative Group took a further bite out of profits at retailer Scotmid yesterday as it warned there has been “no discernible improvement in consumer confidence”.

John Brodie of Scotmid had predicted a 'challenging year'. Picture: Kate Chandler

Scotland’s largest independent retail co-operative announced a £4.5 million operating profit for the year to 25 January, down £1.5m on the same period last year. It’s surplus has now halved in the past four years.

Chief executive John Brodie said, “At this time last year I predicted a challenging year with a static marketplace and this has been the case. Consumer confidence in our core markets remains low and this is borne out by the Scottish Retail Consortium recording a like for like sales decline for the 2013-14 year.”

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Brodie said that, in such a context, Scotmid’s broadly static like-for-like sales were ahead of the Scottish market.

With the benefit of a merger with the much smaller Penrith Co-operative in October, total sales increased by £3m to £381m.

However, Brodie, pictured, said downward pressure on prices and a further reduction in the Co-operative Group corporate dividend hit margins. Although Scotmid is independent of the Co-op, it receives a payment as a major customer of its wholesaling arm.

Scotmid’s bottom line was also squeezed by rising prices, both of the lines it buys from suppliers and of overheads such as labour. The Edinburgh-based society’s non-retail businesses continued to make progress with the property arm showing “good growth” and the opening of a further three funeral homes.

Figures from Premier Foods, also published yesterday, further highlighted the pressures on the grocery sector.

The maker of Mr Kipling cakes and Ambrosia desserts posted a 6.2 per cent drop in quarterly sales and described the market as “subdued”.

It added that a later Easter and milder weather were also to blame for the fall in the three months to 31 March. It expects that trading conditions will remain tough over the rest of the year but said it is on track to meet annual forecasts as it ramps up product launches and marketing spending over the second half of the year.

However, the CBI’s latest monthly distributive trades survey showed retail sales as a whole grew strongly in the year to April, and are expected to grow at an even faster pace next month.

The CBI said grocers were among those enjoying a pick-up, but Scotmid’s Brodie said he is not banking on an improvement in conditions any time soon.

“The reported economic recovery appears to be specific to certain locations and sectors and is still not evident in our retail markets,” he said. “There would normally be a time lag before any recovery filters down to consumers and so I do not anticipate a meaningful retail upturn in 2014.”