Sutherland said Co-op needed "professional" governance

Sutherland said Co-op needed "professional" governance

The sense of disarray swirling around The Co-operative Group intensified today (11 March) with the resignation of CEO Euan Sutherland, who took a swipe at the way the UK retailer was being run. Sutherland's exit will add to the sorry headlines made by The Co-op in recent months but, more importantly, they will distract the company away from the work it needs to do to turn around parts of its business, including food retail.

After the near collapse of the Co-op's banking arm, then the sordid allegations about what a senior executive did in his spare time, Sutherland's exit is the latest headache for the business.

The Co-op confirmed this afternoon Sutherland would leave the company with immediate effect, just hours after the BBC reported he had tendered his resignation. 

Sutherland reportedly offered his resignation yesterday after details of his pay package were leaked. The BBC said this morning The Co-op's board had met last night to try to change Sutherland's mind but his departure was announced just before 13:30 GMT.

"It is with great sadness that I have resigned as chief executive," Sutherland said. "I have given my all to the business and had hoped to be able to lead its revival. However, I now feel that until the group adopts professional and commercial governance it will be impossible to implement what my team and I believe are the necessary changes and reforms to renew the group and give it a relevant and sustainable future."

Ursula Lidbetter, the Co-op's chairman, said Sutherland's resignation must act as a "catalyst for real and necessary change" at the company. Lidbetter said the Co-op would look to "urgently reform our governance".

In the meantime, CFO Richard Pennycook has taken the role of interim chief executive. He said the Co-op's management team would look to "plot a steady course in the coming months".

And the Co-op is facing some choppy waters in its largest sector, food retail. The Co-op is the UK's fifth-largest grocer but has seen sales hit in recent years as its larger rivals makes continued inroads in the convenience sector. The Co-op has, just like its bigger competitors, also been put under pressure from discounters like Aldi and Lidl have gained market share in the UK.

The Co-op became the number five grocer by sales in the UK after its 2009 acquisition of Somerfield but the integration of the business that did not go as smoothly as it had hoped.

The retailer has also faced criticism over the look of its stores, its stock performance and its pricing strategy.

The Co-op has made a series of moves, including investment in IT and improvements to the layout of its stores, changes it is rolling out across the estate.

However, the retailer's market share has been under pressure in recent months, a trend the latest data from Kantar Worldpanel, issued this morning, was continuing.

In the 12 weeks to 2 March, the Co-op accounted for 6.1% of the UK grocery market, down a point from 6.2% last year.

Kantar analysts said The Co-op had "improved on historical performance with positive sales growth of 0.7%" - perhaps a sign of comfort for Pennycook and food retail boss Steve Murrells.

That said, figures also released today by The British Retail Consortium showed how challenging trading conditions are in the UK grocery market. In February, like-for-like food sales fell 1.7%.

Tesco and Asda have both gone public since the turn of the year with plans to sharpen their pricing pencils.

The Co-op has announced its own investment in price and has pledged up to step up that spending.

Amid all the gloom, Murrells last week still insisted - without setting out a timetable, the Co-op wanted to expand its food retail estate, outlining a target of takig the network from 2,800 stores to around 4,000.

However, the Co-op faces a challenge breathing fresh life into its key food retail business amid stiffening competition.

The leaks and boardroom upheaval will only serve to distract the business and are not what the company needs. The Co-op can only prosper if it returns to being a united, focused business.