Co-op profits plummet as company takes a hit from rising energy bills and rising wages

Co-op profits plummet as grocery and funeral company hit by soaring energy bills and rising wages

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Profits at the Cooperative plummeted as it was hit by skyrocketing energy bills and rising wages.

In an update that underscored the challenge facing British businesses, the supermarket and funeral services company said profit fell 84 percent to £7 million in the six months to July 2.

The drop came despite revenue holding firm at £5.6bn.

Cost crisis: The cooperative, led by Shirine Khoury-Haq (pictured), said profit fell 84% to £7m in the six months to July 2.  Revenue held firm at £5.6bn

Cost crisis: The cooperative, led by Shirine Khoury-Haq (pictured), said profit fell 84% to £7m in the six months to July 2. Revenue held firm at £5.6bn

Co-op chairman Allan Leighton, former Asda boss and former Royal Mail chairman, said: “The first six months of the year have been a challenging time for us, as they have been for all businesses. We know that the current test conditions will not improve in the second half.’

The group was hit by rising energy bills and the need to pay higher wages, pushing costs up by £50m compared to the same period last year.

Revenue in the food business rose 1 per cent to £3.9bn, but profit fell as costs rose.

The Co-op has a 6.5 per cent share of the UK grocery market, making it the seventh largest player behind Tesco, Sainsbury’s, Asda, Morrisons, Aldi and Lidl.

The market is fiercely competitive as supermarkets struggle to keep prices low and win over customers from rivals.

Aldi has now overtaken Morrisons to become the fourth largest grocer in the UK.

Against this background, the Cooperative says it will invest £37 million in a reorganization of the food strategy.

This will include price reductions on 120 popular private label products and a renewed focus on convenience stores.

Shirine Khoury-Haq, who was appointed head of the group this year, said: “As we face a cost of living crisis, we are determined to make life fairer for our members, clients and communities in these extraordinary times, and lowering prices for buyers is the first step in our strategy.’

The cooperative group, which includes an insurance arm as well as funeral care and food, said it was taking “decisive” steps to cut costs and reduce its debt. It is looking to save £100m this year and £150m in 2023.

Khoury-Haq said: ‘In a highly challenging economic environment, we have made significant progress in strengthening our balance sheet.

“Our clear focus on building our businesses, while controlling costs, improving our cash position and reducing debt, is paying dividends.”

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