Southern Co-op points to cost pressures as it posts operating loss of £1.3m

The retailer also reported increased turnover, passing the £500m mark for the first time, and continued investment in stores and colleagues

Southern Co-op has reported an operating loss of £1.3m for the 52 weeks to 29 January, down from a £4.3m profit the previous year.

In the society’s annual report, CEO Mark Smith highlighted difficult trading conditions, with the cost-of-living crisis and spiralling energy costs, but said there were also signs for optimism, with turnover for the society hitting £515.4m, up from £494m the previous year.

“I’m pleased to report that total income for Southern Co-op exceeded £500m in one year for the first time ever in 2022,” he said. “This reflected growth across our trading businesses with like-for-like food sales +1% compared to last year.”

Smith pointed to total sales of £39.9m In Southern’s Starbucks franchises, and increased client engagements in our End of Life operations to reach a total of 9,373.

But, added Smith: “There is a significant impact on our 2022 profit results from the spiralling cost of energy in the year. Our suppliers had hedged positions in place on our costs, but faced significant uplifts as the hedges unwound, and the market was not offering equivalent terms. It is expected that some of this excess cost will drop out of forward market prices over time.”

Alongside cost pressures, Smith said “A number of ad hoc or one-off costs have also reduced our reported profit this year, in addition to the multiple effects of the general inflation increases”.

But the co-op still took additional measures to support colleagues “through additional one-off cash payments and payments in kind to help with the cost of living … in addition to the annual increase in hourly pay and salaries.”

Smith said the “small operating loss of £1.3m” reflects “the rapid increase in energy costs, along with the cost-of-living support payments to colleagues”. He also pointed to the unwinding of Covid business reliefs and the one-off revaluation of funeral plan liabilities following the attainment of FCA-authorised status.

Southern opened one new store during the year, a going concern with fuel based in Guildford, and closed four stores in Bromley, Bristol, Freshwater and Ealing. It relocated Post Office services in Denmead and Binfield, merging them into its stores.

Its opened 13 new Welcome franchise with its partners and closed one. At the end of the year, the Welcome estate had grown to 69 stores including two new petrol forecourt stores. The largest Welcome store so far opened in Bromham, Bedfordshire with a sales floor of 6,000 sq ft.

The co-op continued to grow its Local Flavours range, bringing 10 new local suppliers on-board throughout the year and adding sales of £140,000.

The co-op continued its sustainability efforts, delivering a 10% decrease in operational emissions to 11,931 tonnes in 2022, and it won the Queen’s Award for Enterprise under the category Sustainable Development.

Its community projects included a crime prevention partnership with the local police, council and other stakeholders to work with prolific offenders, with £35,000 funding from the co-op over two years. And it continued its work with wildlife trusts in its region to improve local habitat, green spaces and biodiversity.