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UK's Co-Op Warns Of 'Stark' Headwinds After Supply-Chain Woes

Britain's Co-operative group warned of 'stark' economic headwinds, with rising inflation causing more challenges for the supermarket this year after supply-chain disruptions hurt its profit in 2021.

The member-owned group had to battle industry-wide supply-chain problems in the second half of 2021 as it was upgrading systems in its grocery business, Britain's seventh biggest.

Shirine Khoury-Haq, interim chief executive said the disruption cost around £61 million ($80 million), including the impacts of weather and driver shortages.

As a result, it reduced investment and cut costs, but net debt still ballooned to £920 million from £550 million year earlier.

Improved Debt

She said debt had improved since its year ended on 1 January.

"We started the year well within our food and life services businesses," she said on Thursday.

"Food has outperformed the market and is gaining market share in the first quarter."

But there was no respite from rising costs and supply chain challenges for the group, which also provides insurance, legal and energy services.

"Spain has been hit by heavy rain and flooding, which has impacted vegetables, broccoli, courgettes, celery and lettuce," she said. "So we have to look for alternatives."

Russia's Invasion Of Ukraine

Russia's invasion of Ukraine had hurt supplies of sunflower oil, she said, as well as animal feed and wheat prices, which had a knock-on effect on meat, dairy and bakery.

Co-op chair and prominent businessman Allan Leighton said companies were facing rising costs across the board.

"I don't think any of us have seen so much disruption in the supply chain, not just in terms of the ability of suppliers to supply but in terms of what's happening to ingredients," he said.

"There's not a single cost I think in any business that isn't going up."

Co-op reported underlying operating profit of £100 million, down from £235 million in 2020.

News by Reuters edited by Donna Ahern Checkout. For more Retail stories click here. Click subscribe to sign up for the Checkout print edition.

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