PROFITS at the Co-operative Group have fallen by a third after its food stores suffered amid “fierce” competition from supermarkets and its banking arm was hit by the recession.
The group said its 3,000-strong food store division was hurt by the wet weather as people drove to supermarkets rather than walk to shops.
Underlying sales in the division fell 1.2% in the 26 weeks to June 30, while operating profits dropped 16% to £119m.
Its banking division, which has agreed to buy 632 branches from Lloyds, also felt the pain, with operating profits down 67.9% to £36.9m as it bore the brunt of the UK’s double-dip recession.
With its two biggest divisions suffering, overall group profits fell 34% to £174m.
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.”
However, the group said it was confident that sales and profit would improve in the second half as it reaps the rewards of its work to improve its offer.
The group’s food business has been struggling as supermarkets such Tesco and Sainsbury’s have ramped up openings of convenience stores, while consumers have been shopping around.
But the Co-op said it is rolling out a new system which has improved stock availability in stores to 97.5% while it is opening shops for longer, which was helping to increase customer satisfaction.