Scotmid Co-operative has announced a 9.4% drop in annual trading profit to £4.8m, which it attributed to an “avalanche of cost challenges”.

Trading profit fell by £0.5m in the year ending 28 January compared to the same period last year, while turnover dropped by £2.5m to £374m, as a result of the closure or sale of some-loss making stores, including four petrol filling stations. However, it said its underlying like-for-like turnover growth “remained strong”, although it would not reveal specific figures.

The Society said it had faced additional costs of £2m over the past year, resulting from the National Living Wage, the Apprenticeship Levy, the business rates revaluation and pension costs, combined with “the perennially-challenging” retail market.

It has responded to the cost challenge with its ‘make it simple’ efficiency programme, which included the installation of upgraded cash solutions in 51 stores, new stock-handling trollies in 160 stores which helped to reduce double handling, and self-checkout stores in another 24 stores.

Scotmid chief executive John Brodie said: “Over the past year, the Society has faced an avalanche of cost challenges and difficult economic circumstances.

“We have responded with a strong performance – driven by innovation underpinned by a continuous improvement philosophy in all our businesses.

“The challenges have included the National Living Wage, the Apprenticeship Levy, extra rates and additional pension costs. The Society’s retail businesses continue to overcome those challenges with Scotmid’s food stores adapting to the ever-changing needs of customers through a programme of differentiation by driving significant growth in our food-to-go operation and a continuing emphasis on local sourcing.”

Scotmid’s focus on food to go has seen it upgrade backline store preparation areas in 183 stores, which has enabled the group to trial new offers of soup, baguettes, slushee, hot chicken and hotdogs.