Scotmid year-ends show profit up
SCOTTISH independent co-operative Scotmid saw turnover fall but trading profit increase in the year to the end of January. It was a 12-month performance that saw the Edinburgh-based society, which has shops in Scotland, England and Northern Ireland, recover from a difficult start to its trading year, which had been affected by tough trading conditions as well as poor weather in Scotland’s summer months.
The company described it as a “a strong performance in the context of a poor Scottish retail market.”
Turnover dropped from £382.9m in 2014-15, in what had been a 53-week year to £370.6m in 2015-16.
But Scotmid chief executive Brodie was keen to stress that the decline was almost entirely attributable to the one week’s less trading in comparison to the previous year and a number of store closures, including seven of its Semichem outlets and some units south of the border which had come into the society after recent mergers with north of England independent co-ops but had been considered not ‘core’ in ongoing plans.
Trading profit was £5.7m for the 52 weeks to 30 January, 2016, which was 4% up on the 53 weeks of the preceding year.
Although Scotmid does not issue like-for-like performance figures for the business’s constituent parts Brodie told Scottish Grocer he was pleased with the performance of the society’s retail outlets compared to the market.
“The market was tough,” he said.
“I’ve been criticised for being too pessimistic but last year I was probably optimistic when you see how the market turned out.
“We’ve used the Scottish Retail Consortium KPMG sales monitor for a number of years as a barometer of the Scottish market and every month it was in decline.
“And things weren’t helped by the fact that the summer weather was particularly poor.
“We had a good start to the year, then we had the summer which was poor for us and I think we reflected that in the interim results.
“It got better in the autumn and then stronger towards Christmas.”
In the food stores he said the company’s continuing programmes of differentiation and investments in energy efficiency were paying off.
Its collaboration with local and craft bakers was being developed further. And learnings it had taken from the major energy efficiency project it had carried out at its Scotmid Moredun shop had now been used to implement changes in 70 of its food shops.
Scotmid and other independent co-ops have been affected by the difficulties faced by the Co-operative Group in recent years. In particular group buying rebates and dividends haven’t been paid for some time.
However the change to the new Federal Retail Trading Services system that has replaced the Co-operative Retail Trading Group had resulted in improved, more price-competitive product ranges and that had been a positive development, said Brodie.
Scotmid has also been experimenting with substantial ranges of hot food to go at three of its Edinburgh stores, with an offer that is branded The Kitchen.
Roughly a year into the programme he was willing to say that there are likely to be more Kitchens but he isn’t saying where. However, the experience gained at the three trial stores will also be useful in stores that don’t have the full hot food-to-go system introduced, he said.
“It’s a bit like energy saving at Moredun. When you have a trial store you test lots of things. In any trial store you over-engineer, you over-spec. Then it’s about taking the best bits of that and applying it to relevant stores in your estate.”
Other innovations in the retail side of the business included the introduction of a members’ app that provides dedicated special offers.
Beyond food and drink retail Scotmid also has its chain of Semichem high street drug store outlets.
High street retailing has been tough in recent years and a number of Semichems have closed.
But in the last trading year there had been positive developments, Brodie said.
“In the overall market there was no great improvement but Christmas was good for us and that was to do with our product offer.
“Fragrance and seasonal products were successful, we rebalanced our range moving away from celebrity fragrance to a degree and towards prestige fragrance.
“Celebrity fragrance is still very important but we took a strategic decision to rebalance and it proved successful.”
Competition from discounters, the major supermarkets and from other convenience stores remains fierce.
On the discounters Brodie said they were still showing growth but on his reading of the market that was probably coming more from new stores and new space rather than from like-for-like growth in existing outlets.
“There’s no doubt that it’s an exceptionally competitive marketplace.
“But I think small stores is the place to be in the market as lifestyles change.”