Manchester: Co-op Food reported a drop in profits and sales for its first half of trading in 2011. The results comes as the group embarks on ambitious growth plans in the UK, which are expected to see the grocer open more than 300 new food stores over the next three years.
The Co-operative Group’s food business reported a 20% year-on-year decline in operating profit before significant items during its first half of trading, whilst like-for-like sales fell 3.6%.
In an interim results statement for the 26 weeks ending 2 July 2011 the company cited “intense competition” from rival grocers, poor consumer confidence and the start of the government’s austerity cuts as reasons for the downturn, which resulted in total sales slipping 4.6% to £3.7bn.
Peter Marks, chief executive of the Co-operative Group, said that trading conditions in the UK during the first half of 2011 were “the worst he has seen in over 40 years of retailing”.
Difficult times are expected to continue for Co-op Food in the months ahead as the business moves into “a concerted development phase” after integrating the Somerfield supermarket group earlier this year. The Co-op acquired Somerfield in 2009 for £1.6bn.
Major changes to the Co-op supply chain are being made as the group makes a £70m investment into upgrading its food logistics network to cater for the Somerfield takeover, and today’s statement suggested that this will bring a level of disruption to store activity.
New distribution centres have recently opened in Andover and Newhouse, while regional hubs are soon set to be unveiled in Avonmouth and Castlewood as Co-op has now secured agreement for these sites.
Marks said: “The results we are announcing today are in line with our expectations.
“Looking ahead, we do not see signs of any real improvement in the economy and we are planning accordingly to help our customers, as much as possible, through this difficult period.
“Given the outlook and our determination to continue to invest through the cycle, we will find it difficult to match the record profits we made in 2010; but I remain optimistic.”
