The Co-operative Food’s underlying profit slumped 16% to £119m in the six months to June 30 amid “fierce” competition in the food sector and the “unrelenting consumer downturn”.
The grocer said it invested in price, stores, supply chain and its distribution network and extended opening hours during the period.
Sales slipped 2.2% to £3.6bn while like-for-likes were down 1.2%.
The retailer said the performance “reflected the ongoing tough market, the sale of non-core assets and the impact of unseasonable weather, which disproportionately hits convenience operators”.
It added that the figures also reflect the “fierce” competition in the grocery sector, particularly in the convenience market “where competition is growing almost daily”. Rivals including Tesco and Sainsbury’s are aggressively expanding their convenience portfolios.
Despite the sales and profits dip, The Co-op said it has recorded “very encouraging sales” in its new trial stores, where like-for-likes surged 12%.
Since the end of the period the group has agreed a £950m refinancing deal and said today that “despite challenging conditions” it plans a £2bn investment programme across all its businesses over the next three years. It is unclear how much of this will be spent on the food business.
The retailer said that 2012 “will mark the latest stage in the most ambitious change program that the Co-operative has ever completed”. The retailer will open 80 new stores this year and is also rolling out its new stock management system.
It is “investing heavily” in new product development as well as overhauling the workforce management system and increasing trading hours by 15,000 a week, “all of which is being recognised with vastly improved customer satisfaction scores”, the Co-op said.
Co-op is also overhauling its supply chain network by opening new DCs to power growth.
The Co-operative Group chief executive Peter Marks, who is set to leave the grocer next year, said: “It is in times like these when our ownership model as a mutual really comes into its own. We have been able to continue to invest for the long-term development of all our businesses and to protect our customers even though we, like all businesses, have felt the impact of the tough headwinds of the unrelenting consumer downturn.
“A year ago I warned that we were operating in the worst conditions that I have seen in more than 40 years in business. The results we are announcing today show the full impact of that with the profitability of our two biggest businesses affected.
“We are supported in this by our healthy financial position, with a robust balance sheet and strong cash position.
“Looking ahead, we remain confident and we expect an improvement in sales and profit in the second half. The environment is tough and we see no let-up in that. But we believe that the work we have done over the past five years to scale up in our core businesses means we are better placed than ever before to thrive when the economic upturn does come.”
The Co-op acquired Scottish convenience 28-store retailer David Sands in the period, which the grocer said “will be a valuable addition to our portfolio, as we forge ahead with our programme to grow the business by seeking new opportunities right across the UK”.