The Heart of England Co-operative had a “justified reason” to close its non-food store in Nuneaton, according to a review carried out by Crowe Clark Whitehill LLP. The report reached the conclusion that keeping the store in Abbey Street would have been a “drain of the Society’s resources”.
The firm was commissioned by the society’s board to review the viability of the Nuneaton store as well as the process the board had undertaken to reach the decision to close the non-food division. At a special members’ meeting in March members of the Heart of England Co-operative voted for a motion to stop and review the store closures.
The meeting had been called to discuss the closures of the society’s department stores, announced in September 2015. The society ran department stores in Nuneaton, Bedworth, Atherstone, Hinckley, Rugby and Leamington Spa. Crowe Clark Whitehill LLP presented the findings of the review at a special members’ meeting in Nuneaton on 14 May.
“We have been given and have reviewed unabridged copies of all board minutes and papers together with discussion documents involved in the decision making process,” said Crowe Clarke Whitehill LLP.
“The discussions at board level and examinations of the non-food division’s trading prospects since late 2012 were detailed and extensive. They focused upon understanding whether performance could be improved, and assumed a desire among members to continue with the division.”
The report also argued that the board’s decisions had been made on a “sound financial basis”. The accountancy firm, which provides audit, tax and advisory services, also looked at Heart of England’s Members Privilege Scheme, concluding that it was not sustainable.
Crowe Clarke Whitehill LLP said it was “satisfied the board considered a wide range of issues such as the impact of or on brand loyalty”.
“We conclude that the process undertaken was thorough and based upon accurate, relevant financial information.
“It was clear that the board wished to uphold the co-operative ethics of offering services popular with members, but had to recognise that the Members’ Privilege Scheme was too generous. Without it, however, sales volumes would be insufficient to generate profit, and thus the non-food division was substantially supported financially by the other parts of the business and would continue to be so. This is not sustainable. We consider this was a justified reason for cessation,” read the report.
The Abbey Street store is set to close on 18 June, while the society’s distribution centre in Oaston Road also closed down on 30 April. The board argued the closures were based on substantial losses reported by the non-food division, which amounted to £18m over the last ten years. In Nuneaton the non-food division sustained losses of £2.7m. The society said the loses were due to a change in the buying habits of consumers, which tend to use online platforms more and more for non- food shopping.
I agree the co-op can’t continue losing money and can’t stay as it is. But what is its purpose, what do members want?
Commenting on the report, Cllr Sam Margrave, a member of Heart of England, said: “The members did not ask for a report, but a different approach.” Cllr Margrave has been leading a campaign to stop the store closures.
“The Heart of England could have set up a member led committee to look at options to turn the society around, and more importantly, have asked the members what they wanted.”
Cllr Margrave believes the report looks at the financial implications but fails to take into account co-operative values. “The report did not look at governance or co-op values. It looked at the bottom line. Even I agree the co-op can’t continue losing money and can’t stay as it is. But what is its purpose, what do members want? Could they have saved parts of the business like the toy store, or cafe, and therefore some jobs or services?”
Society reports £3.6m profit
The Heart of England Co-operative made a trading profit of £3.6m after exceptional items in what it has described as “one of the most challenging years in its 180 year history”.
Over the past 12 months the society has recorded gross sales of over £92m, a decrease of 2% from the corresponding period in the previous year. The society has extended and refurbished its food store in Long Itchington and opened two new stores in Nuneaton and Coventry. It opened two new funeral homes in Kenilworth and Coventry, with the division reporting an increase of 1.8 per cent in like-for-like sales.
Commenting on the results, Ali Kurji, chief executive of the society, said the business would continue to focus on increasing sales while controlling costs.
“We know that we continue to face tough times ahead but in spite of the uncertain economic outlook ahead we remain focused about our society’s future prospects,” he said.