Co-operative Group is to continue to drive down prices at its food division to compete with the big four grocers after revealing market-beating like-for-like food sales in its interim results.
Co-op chief executive Peter Marks said the integration of Somerfield has led to “thousands” of price cuts and “there is a lot more to come that will make us more competitive”.
Marks said “there will be some great offers in the run-up to Christmas” and expected growth in all product categories. He said the relaunched Simply Value range is up 80% year on year, while Fairtrade has grown 35%.
For the 28 weeks to July 25, group pre-tax profit soared 17% to £228.8m. Like-for-like food sales excluding VAT and petrol were up 7.3%.
The group has disposed of 200 Somerfield stores for competition reasons, or because the shops did not fit in with its portfolio, and raised £650m from the disposals.
Marks said 29 Somerfield shops have been converted to Co-op stores and there has been “great customer reactions”. The Co-op’s store modernisation programme -including existing stores and Somerfield shops - should be completed by the end of next year.
Marks said the modern stores are a key reason why the group’s food business is performing well. “Our sales are driven by the modernisation programme as well as the improvements in price, product and our commitment to our ethical credentials.”
The UK economy is “on the road to recovery” said Marks, admitting “we will bump along the bottom for a while”. He said: “We still have unemployment, public debt and VAT increases that militate against a quick recovery so, while we are past the low point, it will be a slow recovery.”
He also rejected Asda chief executive Andy Bond’s claims to have made the Walmart-owned chain the first genuinely transparent business in response to a “new era of democratic consumerism”. Marks said: “We invented democratic business 200 years ago and we are the only truly democratic grocer.”
The group’s pharmacy operation’s operating profit rose 8.7% to £14.8m, financial services’ underlying shareholder profit climbed 11% to £81.4m, and funeralcare operating profit advanced to £28.1m from £24.1m.