Co-op sees profits surge but cautions over rising costs

The Co-operative Group has seen annual profits jump higher, but warned it will face more than £200 million in costs and spending pressures over the year ahead.

The member-owned mutual said it was bracing for “new headwind and investment costs” in 2025 but would make “active choices” to support staff and customers members amid cost-of-living challenges.

Co-op warned cost hits would include another £80 million from the impact of shoplifting across its retail estate, following an £80 million bill from this in 2024, and £50 million from the increase in national insurance contributions.

Chief executive Shirine Khoury-Haq cautioned over “external pressures” such as geopolitical woes, increased inflation and a higher wage bill.

She said the firm’s strong balance sheet and recent surge in new members would help offset the costs blow, with a sweeping overhaul over the past two years also helping it weather the challenges.

“Whilst not immune from these pressures, our focus is on medium to long-term profitability and our strong balance sheet enables us to face directly into these external headwinds, compete effectively in challenging markets, and pursue growth,” the group said.

Co-op cut around 450 roles in 2022 as part of cost-cutting measures.

Ms Khoury-Haq told the PA news agency that it would not look to cut jobs on a similar scale over the year ahead, but said the group would “look at our business and what we need to deliver and make day-to-day decisions”.

The firm saw pre-tax profits soar to £161 million from £28 million in 2023, with revenues up 1.5% on a pro-forma 52-week basis at £11.3 billion as it cheered a 22% jump in members, to 6.2 million.

On an underlying basis, it swung to a £45 million pre-tax profit from £2 million losses the year before.

Ms Khoury-Haq said: “Our solid business performance alongside the progress we have made in right-sizing the business and delivering against our new strategy, is enabling us to create more value for our member-owners every day.

“While broader economic challenges remain, our businesses are delivering strongly against the market.”

The food retail business saw revenues lift 1.9% to £7.4 billion, with growth of 46% for online sales, at £460 million.

Its funeralcare arm was boosted by a 2.8% jump in revenues to £289 million and notched up a jump in profits to £103 million from £13 million in 2023 thanks to an increase in funeral plan investment returns.

Underlying earnings also lifted across its legal and insurance businesses, to £27 million and £15 million respectively.

The group said it remained on track to hit its membership target of eight million by 2030 and open more than 120 new retail and franchise shops by the end of 2025.