The Co-operative Group is to repay £16m in furlough payments to the government, but will hold on to more than £66m in business rates relief despite announcing a surge in profits during the pandemic.
The mutual, which owns hundreds of grocery stores as well as funeral parlours, legal and insurance services, said pre-tax profits jumped from £24m to £127m in the year to 2 January.
The group’s total revenues rose 5.5% to £11.5bn as sales at its established food stores rose nearly 7% and its wholesale business – via the Nisa convenience store group – increased by 14% as the group benefited from the switch to home cooking while pubs, cafes, restaurants and schools were closed down.
The Co-op also carried out 100,920 funerals, up more than 11% on 2019 as a result of the coronavirus. However, revenues from the funeral business were flat due to restrictions on gatherings.
Steve Murrells, the Co-op chief executive, said the pandemic and lockdown restrictions had led people to shop closer to home benefiting its grocery stores.
However, he said costs had also risen because of the need for additional staff and protective equipment as well as increased sickness and absences linked to the virus. He said the additional costs amounted to about £84m, just ahead of the £82m provided to the Co-op in government support from furlough and business rates relief.
Murrells said the Co-op’s board was unanimous in deciding not to hand back the business rates relief, despite most major rivals, including Tesco, Sainsbury’s, Lidl, Asda and Morrisons, having done so. Other chains including discounter B&M and Pets at Home have also paid the money back.
“We have proven ourselves to be resilient, agile and responsive,” Murrells said. But he insisted that the Co-op had made business decisions, such as keeping stores open to support local communities and adding new outlets, because of the government support.
“We are mindful of the challenges and uncertainty and think 2021 will be as difficult a year as 2020. We need to watch how we use our resources to build a strong Co-op,” Murrells said.
More than a quarter of total business rates relief allowed between 1 April 2020 and 31 March this year, or over £3bn, went to “essential retailers” who remained open during the pandemic according property advisory firm Altus Group. More than £2bn of that has since been repaid, including almost £600m from Tesco alone.
However, some chains that benefited from strong sales during the pandemic, including Waitrose and Iceland, have refused to pay back the support.
Robert Hayton at Altus said: “Some parts of the retail sector thrived during the pandemic and the rates holiday was the icing on an already very sweet cake.”
The Co-op is planning to open 100 new stores this year, up from 50 last year when it also permanently closed nine outlets. The group expects to double the size of its online grocery business this year. It now makes deliveries of online orders from 800 stores up from a standing start a year ago.
The Co-op has also pledged to work with the shop workers trade union Usdaw, to improve hourly pay rates aligned with the independently verified living wage, which the group said would result in a pay rise for 33,000 staff. Minimum pay at the group’s stores will rise from £9 an hour to £9.50 this month.
The group handed out £15m to 4,500 local causes as part of the annual payout from its Local Community Fund as well as £500 each to 150 local causes from additional donations via its members reward scheme.