Scotmid Co-operative has reported a fall in full-year operating profits despite a strong second half performance.

Profits at the mutual fell to £6m in the year to January 26, 2013 compared to £6.5m the previous year.

Total sales rose 0.3% to £428m amid what the retailer described as an “extremely challenging market”.

Scotmid chief executive John Brodie said: “In difficult economic conditions this is a positive result from Scotmid especially when we were faced with a reduction in the rate of Co-op Dividend [its supplier rebate] received, poor summer weather and increased pension costs in the year.

“A key strategic focus in the year was the investment in business improvements and process developments to enhance Scotmid’s long-term growth potential.”

The retailer said it will roll out a new ‘premium fresh format’ including an increase number of local suppliers, fresh products and an in-store bakery following a trial.

The business said its Fragrance House fascia had recorded positive like-for-like growth and had been “very competitive” over Christmas despite heavy discounts from rivals.