Cost-of-living crisis: Scotmid warns of 'substantial external challenges' as costs eat into profits
Scotmid, the Edinburgh-headquartered retail, funerals and property co-operative, has warned of “substantial external challenges” amid an intensifying cost-of-living crisis after reporting a fall in profits.
Chief executive John Brodie said the society would continue to invest for the long term despite warning that costs are likely to rise faster than income growth.
He said: “Businesses are facing a cost-of-living crisis just like households, with both rising costs and squeezed income. The prolonged war in Ukraine, Brexit friction, general UK inflation and rising energy costs have all had an impact.
“With consumer confidence slipping, the society faces substantial external challenges, with costs likely to rise faster than income growth.
“Scotmid will continue to invest for the long term and take considered action to mitigate the impact of these economic conditions,” he added. “Guided by our core purpose, this approach will help the society navigate through the challenging times ahead.”
The group delivered a £1.1 million trading profit for the 26 weeks to July 30, down by £1.9m on the interim result last year, which had been positively impacted by local shopping habits during the pandemic. Turnover was down by £4.8m to £204.2m.
Scotmid’s core food convenience business faced the most significant headwinds relative to its strong performance over the last two years. As expected, there was a reduction in local shopping as Covid restrictions eased but this was overlaid with supply chain issues, legacy Covid costs, low consumer confidence and “severe” cost inflation, the society noted.
The group’s Semichem retail business built back trade from the negative impact of the pandemic. However, this was dampened by a weaker-than-expected recovery in high street footfall due to the cost-of-living crisis.
Scotmid’s property business continued to grow rental income thanks to ongoing strategic investment and divestments. Its funerals business conducted fewer funerals but was able to provide a wider range of services.
Brodie said: “Our result was expected to be down compared to the 2021 interim result, which had the benefit of local food shopping during the pandemic. The main feature of these results is the cost-of-living crisis and the rising cost burden on our business.
“We have responded proactively by bearing down on controllable cost areas, maximising sales opportunities and investing for the long term, underpinned by a strong balance sheet.”
The group, whose trading roots go back more than 160 years, said its balance sheet showed net assets of £113m.
The society’s focus on long-term growth has led to a “variety of technological and operational changes” to support the development of its two retail businesses. In addition, it made two substantial property investments and has been closely managing its controllable costs.
Annual results published in April showed that the society delivered a £5.7m trading profit for the 52 weeks to January 29, which compared with a profit of £6.4m for the prior, slightly longer 53-week period.
Overall turnover of £403m was down £6m on the year before but the group’s net assets increased to a record level while net debt reduced by £7.4m.