Co-op CEO Peter Marks cites ‘tough headwinds in consumer downturn’ but expects improvement in year’s second half
The Co-operative Group has said it sees no letup in the tough environment for consumers, as it posted a 55% drop in pre-tax profits in the first half of the year.
With annual sales of more than £13bn, the group is regarded as a bellwether of the UK’s economy because of the broad spread of its consumer businesses, which include retail and banking as well as farming and travel.
Overall sales at the group inched up 0.2% to £6.6bn, as profits before tax and member payments – the equivalent of pre-tax profits at a public company – tumbled to £69m.
The Co-operative blamed the poor results on the “tough headwinds of the unrelenting consumer downturn”. Peter Marks, chief executive of the group, said: “A year ago I warned that we were operating in the worst conditions that I have seen in more than 40 years in business. The results we are announcing today show the full impact of that.”
He expects an improvement in sales and profit in the second half. “The environment is tough and we see no letup in that. But we believe that the work we have done over the past five years to scale up in our core businesses means we are better placed than ever before to thrive when the economic upturn does come.”
The company said the impact of the downturn was most keenly felt in the banking division, as businesses failed to pay back loans, and the Bank of England kept interest rates at record lows.
Co-operative food stores also suffered amid “fierce” competition from supermarkets. The group said its 3,000-strong convenience stores were also hurt by the wet weather as people drove to supermarkets rather than walk to local shops.
The results come at the end of a busy half for the Co-operative Group, which saw its banking division agree to buy 632 branches from Lloyds Banking Group, and the announcement that Marks would step down as chief executive next May.