Co-operative Group hit by fall in sales and profits
The Co-operative Group saw a 1.1% fall in like-for-like sales at its food business in the first half of its financial year as the business struggled against a difficult economy and continued fierce competition.
In the 26 weeks ending 6 July 2013, Co-operative Food saw its total sales fall by 0.4% year-on year to £3.6 billion. Operating profit dropped to £117.4 million from £119 million a year ago following continued investment in the business which included costs relating to a new distribution centre.
The Co-operative Group said that sales trends at the food business in both the first and second quarters reflected the unseasonal weather patterns. In the first quarter, like-for-like sales were down 2%, driven by the cold weather in March. However, in the second quarter sales improved, falling just 0.3%, buoyed by the June heatwave.
During the first half of the year, the food business focused on giving customers “better value” by reducing prices on nearly 1,000 products. The business also opened 10 new stores and completed the modernisation of its UK-wide logistics infrastructure to improve service to stores.
The group expects the food business to have a stronger second half as its turnaround strategy begins deliver benefits in terms of better stock availability and store refits.
Meanwhile, The Co-operative's banking business posted a loss of £709 million in the six month period, which was largely driven by an impairment charge of £496 million. This meant that group-wide the Co-operative made a half-year pre-tax loss of £559 million compared to a profit of £18 million in the same period in 2012.
Group chief executive Euan Sutherland, who joined The Co-operative Group in May, said it had been a "very difficult” first half and that his first few months in the role had been focused on putting in place a recovery plan for the bank, although there were “no quick fixes”.
Co-operative Bank chief executive, Niall Booker said the underlying issues at the bank were not new adding: “We are now clearly focused on improving the capital position of the Bank. At the same time, we have continued to lend, maintaining our focus on supporting our loyal customers, both in retail and through our continued focus on lending to small and medium-sized businesses.”
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