Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

Co-op boss says past six months toughest of his 40 years in retail

Co-operative Group’s Peter Marks says current trading conditions are the worst he has ever seen as he unveils a drop in profits

The boss of the Co-operative Group warned that trading conditions were worse than in any other recession he had experienced, as the mutual unveiled a drop in half-year profits on Thursday.

Peter Marks, the chief executive, said high fuel prices, the government’s austerity cuts, job fears and falling real incomes meant that the economy had worsened since he warned six months ago that the downturn was biting deeper than anyone had expected.

“It has been a tough six months, the toughest I’ve ever experienced in my 40 years of retailing,” he said. “I don’t think we have come out of recession since 2008 … I’ve operated through several recessions – this is by far the longest.”

He said that in past downturns food sales had remained constant, stressing that this was the first time food sales had taken a hit. “People are spending less on food – that’s a first.”

This has forced the Co-op and other food retailers to slash prices aggressively. Marks said in normal times, a quarter of products are on promotion; at the moment, around 40% are discounted. This even went up to 50% last Christmas. “We’re not into ‘buy one, get one free’ – we’re into ‘buy one, get two free’.”

Cash-strapped consumers are buying less food as well as trading down to cheaper value ranges, although the Co-op’s premium and Fairtrade ranges have also held up. Steve Humes, the finance director, explained: “Shopping behaviours are changing. People are being very discerning, very waste conscious. They’re trading down and dining out less so they are buying premium ready meals.”

While Marks reiterated that all food retailers were suffering – except the discounters but their share of the market remains small. Many of the Co-op’s 3,000 food stores cater for people on middle to low incomes who have been hit hard by the downturn.

The Co-op, Britain’s fifth biggest food retailer, reported a 10% decline in underlying operating profits to £275.1m in the 26 weeks to 2 July. The mutual saw a rise in profits and sales in its financial services division, which includes the Smile bank and recently acquired Britannia building society, but this was overshadowed by a 5% drop in revenues and 21% fall in profits at its food arm, which includes the Somerfield chain.

The financial services arm made underlying operating profits of £131.3m in the period, up from £109.3m the previous year.

The Co-op has been hit by the recent riots, which affected 200 stores, many of which had to be closed. Five are still shut, including stores in Croydon and Garston in Merseyside, and some employees had to be taken to hospital. Marks estimated the impact on the Co-op’s business at around £10m.

The Co-op has donated £100,000 to the national fund that has been set up to help small shops that were damaged or destroyed in the rioting. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds