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Co-op Group profits fall by a third

The Co-operative Group saw its group profits fall by 34% to £174 million in its first half as its food business faced "fierce" competition from supermarkets. The group’s banking business also struggled following on-going uncertainty in the Eurozone.

GENERAL MERCHANDISE

Co-op Group profits fall by a third

The Co-operative Group saw its group profits fall by 34% to £174 million in its first half as its food business faced "fierce" competition from supermarkets. The group’s banking business also struggled following on-going uncertainty in the Eurozone.

In the 26 weeks to 30 June, sales at Co-operative Food were down 2.2% overall and by 1.2% on a like-for-like basis.  Operating profit fell to £119 million from £142 million in the same period in 2011.

However, the group said that underlying sales in its core convenience chain were up 1.4% and that trial new stores were experiencing "very encouraging" trading with like-for-like sales up more than 12%.

The Co-op said it had continued to invest in its store estate, supply chain and distribution network in the period and had also extended opening hours. It plans to open 80 new stores this year and is rolling out a new system which has improved stock availability in stores to 97.5%.

Its banking group, which has agreed to buy 632 branches from Lloyds, saw its operating profits fall by 67.9% to £36.9 million in the period as a result of on-going uncertainty in the eurozone, the prolonged low-interest-rate environment and increased impairments in the non-core corporate loan book.

Group chief executive Peter Marks, who recently announced his retirement, said: "A year ago I warned that we were operating in the worst conditions that I have seen in more than 40 years in business. The results we are announcing today show the full impact of that with the profitability of our two biggest businesses affected."

Regarding the outlook Marks said: "Looking ahead, we remain confident and we expect an improvement in sales and profit in the second half.. The environment is tough and we see no let-up in that. But we believe that the work we have done over the past five years to scale up in our core businesses means we are better placed than ever before to thrive when the economic upturn does come."

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