The background to the issue is that front covers of magazines like Zoo, Nuts, etc provides a kind of "sexual wallpaper" when on prominent and/or easily accessible display, especially where it can be easily seen by children, thus indirectly affecting their development and attitudes towards sexuality and women.
Not sure I agree with that chain of reasoning - I have not seen a great deal of evidence about it - but it is the same logic and reasoning behind it that governs protests over "sexualised clothes ranges" for young girls, for example.
The Co-Op claim that what has prompted this response is demand from their own customers and colleagues, and are already using opaque shields as a form of cover. They are, as a commercial entity, perfectly entitled to choose what they wish to sell - they must be aware of the possible loss of income that their stance might entail - just as consumers are perfectly free to take their business elsewhere if they disapprove of the Co-Ops actions.
Personally I quite admire the stance of a company putting a moral issue ahead of profit. Like PP I do have some concerns over whether this heralds a kind of resurgent public prudishness, but if the Co-Op want to take this stance I am pretty relaxed about it.....