Mutual grocery business The Co-operative Food saw operating profits nosedive 20 per cent in 2011, as sales were sluggish, investment increased and costs rose sharply.
While some of the major supermarket chains such as Sainsbury’s and Morrison managed to produce sales growth in a difficult market last year, Co-op Food saw its like-for-like (LFL) sales drop 2.1 per cent year-on-year in the 52 weeks ending January 31st 2012.
The end of the year saw improvements in trading, with LFL sales down just 0.4 per cent in the fourth quarter compared to a 4.9 per cent drop recorded in Q1, however the business has warned that trading difficulties will continue throughout 2012.
Continuing issues surrounding the integration of former Somerfield stores purchased two years ago proved a drag on profitability last year, as did inflationary increases which added over £60 million to the business’ cost base.
Peter Marks, CEO of the grocer’s parent company The Co-operative Food, stated: “2011 was a time of severe challenge for the UK economy and for our millions of customers and members.
“Consumers have been assailed by rising costs, credit squeeze and uncertainty about the future to an extent unparalleled in recent times.
“Against this background, I believe that this is a creditable performance. We have delivered profitability in-line with expectations, while maintaining our financial strength and resilience.”
Gross sales across the Co-op’s range of businesses, including banking, pharmacy, funeralcare & legal services, rose one per cent over the 12 months but profit before tax was down 5.8 per cent to £396 million thanks to £595 million worth of investment.
In food, 32 new stores were opened by the Co-op in 2011 and the business has spent £12.5 million overhauling its replenishment strategy,
The group also investment in new product ranges and has spent £110 million remodelling its supply chain with two new distribution centres opened in Newhouse & Andover and two further hubs set to open in Avonmouth & Castlewood this year.
Marks continued: “Looking ahead, I do not expect to see any significant recovery in the UK economy during 2012, with little hope of an improvement in disposable income for our customers. If anything, it is quite possible that things will get worse before they get better. In spite of this, I remain optimistic.”
“We will not allow the current economic downturn to knock us off the course we have set. We have the resources, the resolve and above all the belief to make our vision a reality. When better times come - and they will - these are the foundations on which we will build lasting success.”