Britain's Co-op navigates inflation to maintain profit
LONDON (Reuters) -Britain's Co-Operative Group, the mutually-owned supermarkets to funeral homes group, maintained operating profit at 100 million pounds ($125 million) in 2022 despite the pressure of inflation in food, energy and wages.
The group, which also offers insurance and legal services, said on Wednesday it expected the "volatile external environment and turbulent economic headwinds" to continue.
Chief Executive Shirine Khoury-Haq said a focus on paying down debt, which had ballooned in 2021 due to a much-needed systems upgrade, had strengthened the group to weather the inflationary storm.
Net debt fell from 920 million pounds to 333 million pounds.
"We saw that inflation was going to be incredibly high, especially in the areas of salary and energy, so we made sure we were able to mitigate that in the year," she said in an interview. "We took 101 million pounds out of our operating costs."
Inflation is expected to ease to the low single digits by year end, she said. "We wouldn't expect deflation to happen for several years yet."
The group, which has 4.4 million members, said it expected inflation to "dampen profitability in the short term."
The Co-op is Britain's seventh biggest supermarket chain, serving 16.4 million customers a week, up 5% on the prior year.
It has a 5.7% share of the grocery market, focused on the convenience sector, according to industry research from Kantar.
Khoury-Haq said the group's close relationship with suppliers, such as sourcing all of its meat from British farms, had helped it avoid shortages in products like eggs and salad that had hit some its rivals.
She said the Co-op's grocery business had "built really solid relationships with a fewer number of producers, who then prioritise us when these things happen".
The group reported revenue of 11.5 billion pounds, up 3%, and pretax profit of 247 million pounds, up from 57 million pounds.
($1 = 0.8008 pounds)
(Reporting by Paul Sandle, Editing by Sarah Young)
