Heart of England Co-op has recorded its first ever operating loss of £596,000 for the year to January 27, after exceptional costs totalling £2.5m.
The society, which also recorded a trading profit of £1.2m, says last year was “one of the most challenging trading years in recent memory”.
Profit for the year profit of was £3.7m but also covered a longer 53-week period.
The bulk of the society’s exceptional costs came from a £2.1m drop in valuation of two of its trading properties.
“While it’s disappointing to record any loss at all, the fixed asset impairment of our properties at Fieldfare Road in Hinckley and at Cross Keys in Bedworth was clearly the reason for this,” said chief executive Ali Kurji.
“Many businesses closed as interest rates soared from 1.25% to 5.25%. Energy costs also rocketed on the back of the conflicts in Ukraine and Gaza which in turn impacted greatly on disposable incomes.
“The cost-of-living crisis plunged many families into food poverty with some people even being forced to make a stark choice between heating or eating. We have seen consumer spending hit an all-time low and increasing numbers of people rely on food banks to make ends meet.”
Kurji said the situation was compounded by an ‘unprecedented level of competition’ in the food industry.
“We’ve been operating in an extremely volatile and more complex market than ever before. Food retailing has been changing with continued pressure on margins as a result of price reductions by the major traditional national supermarkets to compete with discounters such as Aldi and Lidl. Customers are now more price conscious than ever.
“We face another extremely challenging and uncertain year as all the economic indicators point towards a slowdown.”
Although Heart of England had continued to operate without any borrowings, Kurji said a deal has been agreed to obtain bank finance for a number of future projects.
“These are initiatives which we have committed to and which we believe will further expand and strengthen our business in the coming years,” he said. “Our colleagues, shoppers and 180,000 plus members are at the heart of every decision we make.”
There were many positives to be encouraged by, added Kurji. Group turnover increased by 4.3% to £95.8m and the society’s net worth rose 1.1% to £53.6m. The food and funeral divisions increased sales during the financial year by 4.55% and 0.5% respectively.
In addition, the final salary pension deficit now stands at £2.7m compared to £4.8m last year, a decrease of 42.4%.
Heart of England says it has also continued to invest heavily for future growth, and last June opened its 38th food store in Fieldfare Road, Hinckley, along with a rental unit for Greggs. The £3.8m development was the biggest single investment of the year.
“The large housing development surrounding our new food store is continuing, so it might take a while for it to release its full potential,” said Kurji.
Last May, the society also opened its second Bewiched coffee shop at Shires Retail Park in Leamington Spa.
A total of £524,000 was ploughed into refurbishing food stores at Barwell, Alfall Road, Galley Common, Sapcote, Stoney Stanton, Long Itchington, Crick and Old Bilton.
The full roll-out of self check-out stores was also completed and they now account for 40% of sales transactions. The cycle of improvements in the funeral division saw the refurbishment of the Nuneaton branch.
The society continued its multi-million green investment, with solar power installed at the head office and at 12 food locations, with another eight stores benefiting from more eco-friendly and efficient refrigeration systems.
It was another successful year in terms of community support too. In 2023, the society’s Helping Hearts scheme handed out 293 donations to local charities and community groups totalling £49,000. Since the scheme began in 2000, £1.25m has been gifted to 5,969 good causes.
Kurji added: “We are very different to organisations which exist to maximise the wealth of shareholders with little genuine concern for the local communities they profit from. We believe our approach of giving back provides tangible evidence of an alternative and successful business model.”
