The Co-operative Group is to exit 60% of the Somerfield stores it acquired just five years ago as it seeks to refocus and rebuild its reputation
Co-operative Group interim chief executive Richard Pennycook said it would close the bulk of the stores it acquired for £1.57bn in order to focus on convenience retail but plans nevertheless to open another 100 stores in the year ahead.
He said: “Unfortunately the Somerfield acquisition brought lots of larger stores. They don’t work so well for us. The new strategy will see us exit a lot of those stores. By the time we’ve done that work, around 60% of Somerfield acquisition will have been divested again.”
The mutual is in crisis after being engulfed in scandal over the £1.5bn hole at its banking arm and allegations that former Co-op Bank chairman Reverend Paul Flowers bought hard drugs hit the business.
Pennycook said: “What’s happened this year is not an accident. Over a number of years, management of this organisation have taken some fundamental missteps which have resulted in a weakening of a very proud organisation. 150 years of heritage has been badly damanged over the past five years.
“The current governance arrangement have not made it possible for those around the board to exercise control on the management team taking those actions.”
Co-op director Lord Myners is conducting a review of the Co-op’s governance but there has been opposition to reform from inside the organisation including at group board level. Four key principles will be put to members to discuss at a general meeting next month.
Pennycook said it was an attempt to create a “compelling purpose” for the group’s existence.
He said: “Governance reform in isolation is meaningless. Our customers, members and colleagues all need to know that there is a compelling purpose, a reason to be here and a compelling strategy for our organisation.
“If they buy into that then the change necessary in order to deliver on that purpose and strategy, we hope, will be widely accepted.”
Pennycook said that there was a lack of transparency at the Co-op and revealed that the board had been unaware that the group had 650 properties, predominantly shops, that it did not occupy.
He said: “I don’t think the transparency had been there for those governing the organisation to see the decisions that had been taken. You can end up in a situation where there is 650 surplus properties – that’s property we don’t need. It’s the size of a national retail chain and it takes a huge amount of management.”
Meanwhile, Pennycook revealed that The Co-operative Group has received over 100 expressions of interest for both its pharmacy and food businesses.
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The Co-op to quit 60% of Somerfield stores as it bids to rebuild reputation