The Co-op has vowed to use a “value for money sword” to spear the competition as it aims to “remove price as a barrier” to shoppers visiting its stores.

Co-op retail chief executive Steve Murrells said the grocer’s fall in first-half operating profits came after an investment in price to aid shoppers with stretched budgets.

The Co-op Food today reported a 1.3% fall in profits to £117.4m in the 26 weeks to July 6, down from £119m the previous year.

Murrells told Retail Week: “We have made a significant investment in price. It was the main reason there was a slight fall in our profits at the interims.

“We recognise that over the course of the next 12 months we have to combine quality, convenience and price as a real value for money sword.”

The mutual had invested in 1,000 staple lines but Murrells admitted the price of other products may rise. It hopes to wrest shoppers from rivals including Sainsbury’s Local and Tesco Express with which it has struggled to compete on price.

The investment is part of the retailer’s True North strategy to strengthen its focus on availability, value for money, convenience, customer service, product quality and links to the community.

Murrells said The Co-op may consider disposing some larger stores as its convenience arm drives growth but has no plans to shut large numbers of shops.

First-half like-for-likes fell 1.1%. The Co-op said like-for-likes fell 2% in the first quarter because of the cold March and improved to a 0.3% fall in the second quarter.

The retailer said: “In food, we anticipate a stronger second half as the benefits of our food strategy start to be realised in better stock availability, improvements to the customer offer and with the refit of more than 400 stores.”

The Co-op today also revealed a plunge in group pre-tax profits to a loss of £559m from an £18m profit last year.

Co-op group chief executive Euan Sutherland said the business would have to repair damage done to its reputation after revealing a £1.5bn hole in its banking division’s finances earlier this year, which it aims to plug.

He said: “The brand has taken a bit of a knock over the last couple of months. This is a 150-year-old brand. It’s at the heart of every community in the UK and in every postcode. We are getting incredible loyalty from customers and encouraging support but we have to redress that knock we’ve taken.”