The Co-op Group has announced that its chief executive will step down this weekend after a difficult year that included a cyber-attack and recent claims of a “toxic” culture at the business.
Shirine Khoury-Haq will depart on 29 March and Kate Allum, a board member and former boss of the dairy group First Milk, will step in as interim boss while a permanent replacement is sought.
News of the exit came as the company, which owns more than 800 funeral parlours and an insurance and legal advisory business, as well as operating more than 2,000 convenience stores, dived to an underlying loss of £125m.
The drop from a £45m profit the year before came after it took a £107m profits hit from the damaging IT hack, which forced it to shut down some systems.
On Thursday, Khoury-Haq denied that her resignation was linked to the allegations of a toxic culture. “My decision to leave was very much a personal decision,” she said. “The reason is I want to go and do something else.”
Sales at Co-op fell 2.3% to £11bn in the year to 3 January after the mutual’s shops were left with gaps on shelves following last April’s cyber-attack, which knocked £285m off sales.
Co-op, which has said it “lost trading momentum” while it focused on recovery from the attack, has also been affected by a “contracting convenience market” as household budgets have come under pressure.
The group said it also faced “layered cost headwinds” of about £150m during the year from increases in employers’ national insurance, pay and packaging taxes.
Khoury-Haq’s departure after four years heading the company, and almost seven at the business, comes a month after reports of concerns about the culture at the top of the group.
In February, the Co-op defended the behaviour of its bosses after reports said senior managers had complained of a “toxic” environment at the retailer. The grocery and services chain said it did not believe the criticisms “represent the views of our broader leadership and colleagues”.
The BBC reported that a letter, claiming to reflect the views of a large number of senior managers, had been sent to the chair and to another member of the Co-op board last month.
The letter raised complaints about a culture of “fear and alienation”, with some senior staff members feeling scared to raise concerns about business decisions in front of the company’s management, including Khoury-Haq, according to previous reports. The company defended its culture and the behaviour of its leadership team at the time.
Khoury-Haq said on Thursday that Co-op colleagues had reported to her that they did not recognise the reports of a toxic culture, but there was “some discomfort” in areas of reorganisation.
“They said to us that there were concerns where we had not communicated as clearly as we could have,” she added. “We’ve of course taken on that feedback.”
She said in a written statement that it had “been an honour to lead our Co-op”, adding: “Following last year’s cyber-attack, the organisation is now ready to deliver on an ambitious strategy of stabilisation and transformation.
“This extends beyond the timeframe I had planned for my CEO tenure and now is the right moment to hand over to leadership that can commit to seeing the strategy through.”
