Co-op boss takes pay cut as profits dip

The Co-operative Group has reported 3.3% underlying profit growth in food sales, up to £250m for the 52 weeks to 2 January 2016.

Like-for-like (LFL) sales in food also increased by 1.6%, up 5% on a volume basis, and revenue was flat at £7.0bn. The company said its core convenience business grew ahead of the market, due to investment in price and products, up 3.8% on an LFL basis.

Group revenue for the business showed a slight drop, down from £9.4bn to £9.3bn, and profit before tax was down to £23m from £124m, though the company pointed out that the 2014 profits were distorted by a £121m windfall from one-off disposals.

The Co-operative warned that it expected next year’s underlying profits to be lower, as it continues to invest in its three-year rebuild programme (launched in 2015, when the retailer announced that it was “rebuilding The Co-operative Group for the next generation”).

Meanwhile, Richard Pennycook, chief executive of The Co-operative Group, has asked for large pay cut from £1.25m to £750,000. His bonus and pension contributions will also be slashed, leading to a total drop in remuneration of almost 60%.

new food stores

During the year, the company opened 97 new food stores and closed 91, taking its estate to over 2,800. It also refitted a further 264. It added that it planned to open a further 100 new stores this year, and refit a further 150.

The Co-operative said in the update that investment had also been put towards cutting prices, with £125m being used in price-cutting initiatives – in the coming year, the group said it would continue to invest in price cuts.

The board also announced that it anticipated dividend repayments would resume once the three-year rebuild programme was completed at the end of 2017.

Pennycook said: “This has been a year of further progress at The Co-op, as we have invested to drive the growth of our businesses. Underlying profits have increased, but our priority this year has been on putting the building blocks in place for the long-term.

“We are, however, only one year into our rebuild [programme], and whether it is driving further growth in our businesses, improving member engagement or getting back to our campaigning roots, there is still much to achieve.”