Scotmid sees profits hit by ‘avalanche’ of cost pressures

● Full-year trading profit tumbles to £4.8m from £5.3m ● Additional costs of £2m as group eyes further gloom

Scotmid Co-operative has seen full-year profits fall, dragged by an “avalanche” of cost challenges and a troubled economic backdrop.

The retailer reported a trading profit of £4.8 million for the year to 28 January, down from £5.3m in the prior 12 months. Scotmid said this year’s figure came despite “unprecedented” external cost increases with robust sales growth and stringent cost control.

It flagged additional, aboveinflation costs of £2m such as the National Living Wage, the Apprenticeship Levy, rates revaluation as well as pension costs, combined with the “perennially challenging” retail market.

Chief executive John Brodie highlighted an “avalanche of cost challenges and difficult economic circumstances” during the year.

He told The Scotsman: “It was an exceptional year for additional cost challenges… in a time when it’s challenging economically. There’s not much growth in the economy. Given those challenges, the society delivered a solid performance to mitigate the vast majority of those.”

He said Scotmid’s food stores have been adapting to customers’ changing needs “by driving significant growth in our food to go operation and a continuing emphasis on local sourcing”.

And he sees the short-term outlook remaining bleak in terms of consumer confidence. “We’re not seeing any certainty around Brexit or more positive economic indicators, so our view is that it will be challenging into 2018 and beyond.”

However, on a more positive note, the group has experienced a “very successful” diversification of its property investment portfolio, and said a resilient residential property market in Edinburgh helped its asset base to grow by £8m, reinforcing its £99.6m balance sheet.

Scotmid also recently announced that it was to put forward plans to demolish its Gorgie Road shop in Edinburgh and build a new supermarket along with accommodation for about 150 students.

Brodie said this is part of the strategy for the portfolio, “in terms of both diversification and where we can create value and opportunity for underutilised assets”.

Scotmid began in a house in Edinburgh in 1859 when 12 men met to form a co-operative society. Brodie said: “The resilience we have shown over the last few years will continue in 2018 as we tackle both new and existing challenges, using our continuous improvement philosophy.” Online fashion retailer Boohoo has reported surging full-year sales and profits as it reaps the rewards of successful acquisitions. The group reported a 97 per cent increase in revenue to £579.8 million in the year to 28 February as pre-tax profit rose 40 per cent to £43.3m. Growth was helped by the recently acquired Prettylittlething, which saw a 228 per cent rise in sales to £181.3. The results came against a “backdrop of difficult trading in the UK clothing sector”.