The Co-operative Group has suffered a fall in first-half profits and sales in retail conditions described by chief executive Peter Marks as “the worst I have seen in over 40 years”.
For the 26 weeks to July 2, The Co-op reported group underlying operating profit fell from £308.1m to £275.1m, while underlying profit before payments to members fell from £262.3m to £230.8m.
Group sales including VAT fell from £6.95bn to £6.89bn.
Marks said: “At the full year we warned that the downturn was biting deeper than anyone had expected and predicted that challenging trading conditions would continue into 2012. This has clearly proved to be the case. Indeed, it is the worst I have seen in over 40 years of retailing and, against this backdrop, the results we are announcing today are in line with our expectations.”
The food business reported operating profit fell from £171.6m to £135.4m, while sales were down 4.6% to £3.7bn. Like-for-like sales were down 3.6%.
The retailer said the food business was hit by competition in the market, the downturn in consumer confidence and the start of the government’s austerity cuts.
The Co-op has recently come to the end of its integration with Somerfield, and has now moved into a development phase where it is modernising the supply chain systems and processes. The retailer said this means there is some disruption in stores that adds further challenges to the post-integration phase and the ongoing economic environment.
The Co-op is currently enhancing its food range and overhauling the ways in which products and produce are replenished in-store.
Marks said: “Looking ahead, we do not see signs of any real improvement in the economy and we are planning accordingly to help our customers, as much as possible, through this difficult period. Given the outlook and our determination to continue to invest through the cycle, we will find it difficult to match the record profits we made in 2010; but I remain optimistic.
“Our ownership model means that we can take a long-term view and we are as driven, determined and ambitious as ever to modernise our business. Following the overhaul of the group in recent years the business is in excellent shape and when the economic upturn finally begins we will be better placed than ever before to take advantage of new opportunities.”
The Co-op pharmacy business reported operating profit down £5.3m to £12.7m. It noted the reduction in government funding for prescriptions that impacted half-year profits.