The Co-operative Food today reported a 16% fall in half-year profits, and a like-for-like sales decline of 1.2%. At group level operating profits fell by more than a third.Here, group chief executive Peter Marks and chief financial officer Steve Humes explain group performance.

Retail Week: How has the last six months been?

Peter Marks: I said a year ago that these were the worst economic conditions I’d ever seen and I remember the recessions of the ’70s, ’80s and ’90s. This is the longest and deepest. The food and banking businesses have had a difficult six months. This is the first time I’ve seen a shrinking in the grocery market. We have had the worst summer since the Ice Age and impulse sales have disappeared. Beers, soft fruit, ice cream and salad sales have been non-existent. We had a summer last year, but not this. I think our like-for-like performance is in line with the market.

Steve Humes: These numbers are disappointing no one likes to go backwards but we planned for it. It’s not come as a surprise. We are in an unprecedented period of low food growth. People are prepared to walk another 50 yards up the high street if they can get a better bargain. April and June were the worst on record and tracked absolutely in sync with the weather.

Can you tell us more about your new-format stores?

PM: We have 12 new-format stores where we’ve tailored the ranges and are seeing double digit like-for-like growth. We are now going to build on that trial and roll it out at the end of the year and beyond. Previously our ranges would be the same in Scotland and the East of England, but now we are tailoring it to local communities.

How are you competing on price?

PM: We have invested in price in the first half. We have been cafeful in managing our costs in order to make sure we protect customers from inflation. We do not want to burn £5 notes in the street buying sales, and we have been successful in cutting costs. We are not going to take a one size fits all approach any more.

What will new food chief executive Steve Murrells be tasked with?

We have a new senior team in food and a new impetus, new thinking and a real new approach on food. We will be looking at improving the customer offer. We have a big customer insight programme underway.

Do you regret the Somerfield acquisition?

No. It was a fantastic acquisition. It has given us buying power and I dread to think where we would be if we had not acquired Somerfield. Unfortunately it coincided with a recession. It was tough to integrate but any chief executive who says integrating is easy is absolutely round the bend.

Do you have any plans to launch an online grocery offer?

We are not looking at online grocery. We are investing in technology in stores instead. We see online hitting the big hypermarkets, people are buying their bulk products online and buying convenience products from us. Look at Morrisons - they do not have an online offer. We will never say never but it’s not a priority.

What has the acquisition of the Verde business from Lloyds Banking Group given the rest of the group?  

It has allowed us to increase our presence. Hopefully this will bring more customers into contact with the Co-op and encourage them to visit our other businesses like the pharmacies and food stores.  

What do you expect of the economy?

We expect it to bump along the bottom. If there is any growth next year it will be small. We are taking a prudent approach and not planning for 2013 to be any better.