The Co-operative Group has posted a 9.5% drop in underlying operating profits in its food division to £288m from £318m last year.
In the year to January 5, total sales excluding VAT but including fuel edged up to £7.44bn from £7.34bn in the previous year.
Like-for-like sales were down overall by 0.7% but like-for-likes across its core convenience estate jumped up 1.9% in the year.
Group sales rose 1.5% to £13.5bn in 2012 from £13.3bn the previous year. However, underlying profits across the society plummeted 89% to £54m due to a number of factors in its banking division.
The Co-op said profitability was hit as it absorbed “significant” food price inflation and it invested in service, price and value within an “intensely competitive” environment.
Group chief executive Peter Marks said the second half of the year was better than the first half as its like-for-like sales in its food division returned to growth in the final quarter to 0.3%.
Looking ahead, Marks said: “We are building on the momentum of the second half under our strengthened management team with a continued focus on prices and the roll-out of new store formats. During 2013 we will further improve the shopping experience for our customers.”
Last year, the retailer opened 83 new Co-operative Food stores, which included the acquisition of Scottish convenience chain David Sands and 10 former Costcutter stores in London. It also standardised trading hours to provide a more consistent service.
The Co-op also invested in a new £22m distribution centre in Avonmouth, which opened in November, to support the growth of its store estate. It added that it has made “excellent progress” on its new Castlewood depot in the East Midlands, which will be sending out deliveries from March 2013.
Marks added: “We have a clear view of what is strategically important to ensure that the remarkable transformation of the group over the last five years is fully embedded and can be built upon.”
He said trading for the new year was in line with expectations but he doesn’t expect to see a marked difference in trading conditions in the UK.