Store makeover boosts profits at the Co-op

THE revamp of its food business is paying dividends for Manchester’s Co-operative Group which today revealed a massive hike in profits.

In the 28 weeks to July 26, operating profits before significant items rose 41% or £74.5m to £256m while revenue at the group, which last year merged with United Co-operatives, was up more than a £1bn to £5.1bn.

Chief executive Peter Marks said the group has been buoyed by a strong performance from its food business, which saw sales soar 43.5% to £2.4bn and trading profit rise 67.7% to £126m, driven by a huge store refit programme and an expansion of ranges.

Earlier this year, the group agreed to buy supermarket chain Somerfield. The deal is currently being considered by the Office of Fair Trading. However if approved, the combined food business will operate more than 3,000 stores and have sales of £8bn, “propelling the group back into the premiership of food retailing”.

Elsewhere, operating profits in its funeral care business rose 37.3% to £24.1m on the back of tight cost controls, while the travel business reported a £7.9m profit following its break even position last time.

However, operating profits at the pharmacy business fell £3.8m to £13.6m following government moves to reduce the amount of reimbursement to pharmacies from prescriptions.

Co-operative Financial Services, which last year was hit by weather-related insurance claims, was boosted by a strong performance from Co-operative Bank and profit before tax and significant items was up to £73.4m from £38m last year.

Dividend payments to members more than doubled to £94.7m from £45.6m. Mr Marks said: “These results show that we are continuing to make huge strides within the trading group.

“Looking ahead, it is clear that the rest of this year will be tough because of the wider economic environment. The credit crunch, the ongoing slow-down in the housing market, food price inflation and energy cost rises will weigh on all businesses – and our sector will continue to be as competitive as ever.

“In spite of this, we are confident that our business model is robust and we will continue to maximise opportunities as and where they present themselves.”