Co-op food sales dip on economic downturn

FOOD sales at the Co-operative Group fell in the first half of this year amid what the firm’s chief executive Peter Marks described as the most challenging conditions he has seen in 40 years of retailing.

Turnover in the supermarket division, the UK’s fifth-largest food chain, dropped 4.6 per cent to £3.7 billion. Despite a stronger performance by financial services, underlying group profits were 10 per cent lower at £275.1 million.

“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,” Marks said, adding that the group would “find it difficult” to match the record full-year profits posted for 2010.

The trend in Scotland – where the group has some 370 food stores following the Somerfield acquisition – matched that of the UK as like-for-like sales fell 3.6 per cent.

At group level, profits before payments to and on behalf of members – the equivalent of pre-tax profits for a quoted company – fell from £171.9m a year ago to £167.6m, a drop of 3 per cent.

Underlying profits were 20 per cent higher at £131.3m, up from £109.3m previously. Income jumped by 16.7 per cent, driven particularly by growth in the insurance business.

However, CFS was forced to take a one-off charge of £90m to cover claims for potential mis-selling of payment protection insurance (PPI), an issue that has impacted across the whole of the industry.