Costcutter losses narrow but sales drop below £700m mark

CONVENIENCE supermarket group Costcutter narrowed its losses by £11.1m in 2015 but continued to feel the impact of a painful transition to a new business model.

The business, which is celebrating its 30th anniversary this year, said it is now seeing sales growth month on month and expects to return to profit “in the next one to two years.”



The retailer replaced Nisa and entered into a sourcing and distribution agreement with P&H in mid-2014 which transformed how it operated.

However there were teething problems affecting delivery and product availability which dragged on into the first quarter of 2015 that affected sales.



The move also generated three-quarters of more than £10m of exceptional items incurred in its 2014 financial year.



Accounts filed at Companies House for the year to December 26, 2015 reveal the York-based retailer reduced its pre-tax losses on ordinary activities from £24.9m in 2014 to £13.9m last year.



This was achieved despite a £95m fall in UK sales, which was only slightly offset by a £27m increase in European outlets, resulting in a 9% fall in turnover to £699.1m.



Costcutter chief executive Darcy Willson-Rymer said: “Overall, while the financial performance for 2015 was affected by the tail end of the transition and reflects the continuing investment in the new business model, the performance through the second half of the year and early 2016 provides grounds for optimism about the future of the business.”



Costcutter changed its supplier from Nisa to Palmer and Harvey (P&H) in 2014 but said the transition was “not without its challenges”.



It added: “Since then delivery standards have improved dramatically, meeting expectations since the second half of 2015.” 



It said the new arrangement has “completely transformed” the company’s business model with Costcutter now controlling product range, price and promotions.



The retailer, part of Liverpool-headquartered Bibby Line Group, operates around 2,500 shops under the Costcutter, Mace, kwiksave and Supershop brands, which are mainly operated as franchise businesses.