The UK’s Cooperative Group has said interim profits for its food retailing unit fell to £35.8m (US$64.6m), compared to £61.6m in the same period of the previous year.
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For the six months to 24 July 2004, the group’s food sales increased to £1.84bn, from £1.81bn a year earlier, helped by the expansion of the group’s store network, which has grown from 600 to 1,800 over the past four years.
However, the group said that this expansion, coupled with under-investment in logistics and systems, “seriously stretched management capacity resulting in a delay in recognising some of the underlying challenges facing the business”.
The Co-op said that although increased price competition from rival supermarkets had resulted in some margin reductions in the period, it was mainly the group’s retail execution, rather than the increased competition, that caused the reduction in profitability.
“We are already taking steps to improve our consumer offer and to deliver a consistent level of service across all of our 1,800 convenience stores, and this is beginning to bring improvements. However, we do not expect recovery to become evident until 2005,” said group chief executive, Martin Beaumont.
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By GlobalDataThe group, which acquired 64 convenience stores from Conveco during the first half, said it was taking steps to improve on-shelf availability and reduce stock leakage. It is also creating a new national distribution centre for slow-moving lines in order to free up capacity in the rest of its distribution system.
“Trials of our next generation of Welcome stores are showing excellent sales growth. Although it is too early to draw final conclusions we will extend the trial from three to 20 stores by the year-end,” the group said.
