Co-op profits have taken a dent in the first half of this year, with bosses describing a “highly challenging economic backdrop.”
The retailer posted underlying EBITDA of £218m, with earnings subdued compared to the year prior when Co-op posted £248m for the first half of 2021.
With arms spanning grocery, funeral, insurance and legal businesses, Co-op’s revenue was flat versus the year before, sitting at the same £5.6bn sum.
“We know that the current testing conditions will not ease in the second half,” Allan Leighton, chair of the Co-op, acknowledged.
In its outlook statement on Thursday, Co-op said it expects to be forced to navigate “continued challenges” throughout the rest of the year, with inflationary pressures “likely to prolong economic uncertainty amongst consumers and businesses alike.”
However, the company said it was “better equipped to weather the effects of these immediate pressures,” due to actions taken in the first half.
Headwinds are being partially mitigated by in year cost saving targets of around £100m, which will reach £150m in 2023 as the savings annualise, Co-op said.
Last month, the mutual said it would sell its petrol forecourt business to Asda in a £600m deal.
This transaction includes 129 petrol forecourt sites, spread across the UK and represents five per cent of Co-op’s retail estate of 2,564 stores.
It will use the funds to reinvest in its stores and e-commerce operations, while expanding its presence with more shops nationwide.
Co-op said the deal is expected to be completed by the fourth quarter of 2022, and after this it anticipates debt to drop to approximately 1 x EBITDA.