Southern Co-op reports increased profits despite supply disruptions

CEO Mark Smith said the society is working to improve its colleague experience after being hit by labour shortages affecting the retail sector

Independent retail society Southern Co-operative has reported an operating profit of £4.3m for the year ending 30 January 2022, up from £2.8m the previous year.

The society’s preferred profit measure of EBITDA increased 3% to £19.2m, and profit before tax rose by £1.2m to £3.3m.

Total income reached £494m – an increase of £4m on 2021, which the report says is driven by rising coffee sales which were helped by a combination of fewer interrupted trading hours, and the opening or acquisition of new sites.

CEO Mark Smith wrote in the report that food sales were strongest in the first half, easing back later in the year under the impact of supply disruptions.

The funeral business completed less client arrangements than were planned for the year, 1% lower than the 2020-21 figure.

Measured against the comparable pre-pandemic year of 2019, total society income was £27m, 6% higher, including a two year like-for-like increase of +3.3% in food sales and a 9% increase from comparable coffee stores, added Mr Smith.

He said 2021 was “characterised by well documented and overlapping supply side challenges, something that was felt across the food industry. We put considerable time and resources into managing these constraints, working hard to keep the disruption impacts on our customers to a minimum.

“Unfortunately, toward the end of 2021, interruptions in supply into our stores intensified for a period of time, resulting in shelf availability impacts on certain lines. This has since eased, but I would like to apologise to our members and other customers for this temporary worsening of supply caused by IT system issues at our logistics provider.”

Mr Smith said there were also operational challenges from labour shortages, with higher colleague turnover and vacancy rates in the second half of the year. “It remains a priority to further improve our touchpoints with colleagues and to build on the attractiveness of our brand as an employer,” he added. “We want to offer our teams the best possible overall employment experience.”

Measures in place include colleague wellbeing support and a new permanent hybrid working programme for head office colleagues.

Southern has also been working to increase growth and resilience, he said, adding the Starbucks franchise to 20 new stores, bringing the total to 50, with a target of 100 by 2025.

End of Life Services also grew, with three new woodland burial ground businesses, and six new funeral homes.

In food, growth continued with 13 new stores opened by independent partners under the Welcome franchise format. For Southern’s managed food estate, 15 stores were added to its online rapid grocery delivery service, bringing the total number active in that channel to 43. A new food store opened in Basingstoke.

Mr Smith added: “We have put further core investment into enhancing how we engage digitally with our members, and other customers, and started a major project to replace all our people IT systems.”

He said this will help deliver “a positive colleague employment experience, while enabling growth, and a more efficient operation.”

The society has also completed the planned deployment of self-service check out options to 168 stores.

Southern’s report also documented the society’s efforts on sustainability, including the trial of soft plastics recycling bins, work with franchise partner Starbucks to reduce waste, water and carbon, and the creation of a new new board position, climate action ambassador, taken by board member Helen Jackson. The society is following a climate action pathway, with targets including a 50% cut in absolute greenhouse gas emissions by 2030 compared to 2019.