Scotmid warns of post-Brexit challenges for retail

Co-operative retailer Scotmid plans to develop its takeaway food offer in line with changing consumer habits after reporting flat profits for the first half.

Scotmid warned of tough times ahead. Picture: Murrie Thomson
Scotmid warned of tough times ahead. Picture: Murrie Thomson

The Edinburgh-based group, which dates back to 1859, booked trading profits of £2 million for the 26 weeks ending 30 July, as it faced challenges including price deflation and “lukewarm” customer sentiment. Turnover, however, jumped about £4m to £185.5m.

Chief executive John Brodie told The Scotsman that the group was “satisfied” with its performance and having held its level of trading profit in the circumstances.

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He cited the Scottish Retail Consortium reporting a 1.6 per cent average reduction in like-for-like sales in the six month period, saying: “The market has continued to be challenging as referenced by the [SRC] figures for both food and non-food, with the market declining every month of the first six months of our financial year.”

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Scotmid sees tough times ahead despite rise in annual profits

Scotmid also looked at the impact of the UK’s vote to leave the European Union, saying the last six months saw the “magnification of general market uncertainties” both in the run-up to and following the decision.

Brodie said: “Clearly, there’s uncertainty from Brexit that hasn’t impacted to any great extent yet and the biggest challenge is we don’t know how that will unfold going forwards.”

The society said it expects the second half of 2016 to be “equally or more challenging” with the full cost impact of the national living wage and said this will carry on into 2017 “when we face further cost increases including the apprenticeship levy”.

Looking at the introduction of the living wage in April, Brodie noted: “We knew we had to deliver a robust response to mitigate the impact of that, which we feel in this initial period we have done, but clearly there is a lot of work to do ongoing.”

On a more positive note, the chief executive said Scotmid’s “food to go” offering, providing items such as soup, hot rolls and donuts, helped offset the market decline.

“We feel it’s a point of difference for us in driving customers into the store,” he said, adding that it comes “as people’s lives change, and they have less time, and making it more convenient for them”.

Scotmid will “continue to develop and evolve” this part of its business, he added, saying: “A more developed offer wouldn’t necessarily be right for all stores but we’ll continue to refine it.”

Brodie said that regarding the size of its network, including about 200 food stores and more than 100 outlets of health and beauty chain Semichem, there have been “no significant changes in the past six months and we’re not anticipating any significant changes going forwards”. However, he said it will consider opportunities for growth, and stated: “Clearly, we have to think about where the most profitable opportunities are for us.”