‘Avalanche’ of extra costs hit Scotmid’s bottom line

RETAIL: Retailer’s profits hit by the impact of National Living Wage and pensions

Scotmid yesterday said an “avalanche” of cost challenges weighed on the group’s profits last year.

The society, which also owns Semichem, faced additional costs of £2 million above normal inflation rises through the National Living Wage increase, the Apprenticeship Levy, rates revaluation and pension payments.

Turnover fell by £2.5m to £373.7m in the year to January 27. Pre-tax profits fell from £7.6m to £6m during the period.

The firm said the reduction in turnover was mainly due to the closure of eight loss-making Semichem shops in the period.

Scotmid’s chief executive John Brodie said: “We have faced an avalanche of cost challenges for us this year against a backdrop of a lacklustre economy.

“You always expect a normal level of inflationary costs, but in 2017 the challenge was that so many extra costs impacted at the same time.

“The rates revaluation, additional pension costs, the national living wage going up and the apprenticeship levy meant we have faced a significant extra cost burden.

“We have responded with a strong performance – driven by innovation underpinned by a continuous improvement philosophy in all our businesses.”

Scotmid continued to invest in its retail shops during the year.

Its property division saw its rental income grow and the funerals business produced an improved performance over the second half of the year.

The chief executive said he expected this year to continue to prove challenging for retailers.

He added: “I expect 2018 to be yet another difficult year for retailers generally with ongoing structural changes and no significant easing of cost challenges and more regulatory changes.

“The resilience we have shown over the last few years will continue in 2018.”

Mr Brodie refused to rule out more shop closures across the group.

“Where we can not get the viability of the store to work we will take the tough decisions to deal with loss-making stores.

“Certain High Streets which were once vibrant and places we wanted to trade from are no longer viable options for us and many other retailers.

“We will look at selective opportunities for new stores but the bulk of our investment in the past year has been investing in our core food stores.”

Scotmid is extending its Community Connect project in which shoppers vote on which groups benefit from Scotmid’s charity donations.

rmclaren@thecourier.co.uk

Top: Scotmid chief executive John Brodie. Above: The group has invested heavily in its retail shops.