Co-op's Marks sees worst conditions for 40 years

Peter marks, the chief executive of the Co-operative Group, the operator of grocery stores and financial services, says the UK consumer spending environment is the worst for more than 40 years, as the group posted a slump in first-half profits.

A major drag on its performance was a 3.6 per cent fall in underlying sales at the Co-operative food business, which completed the acquisition of Somerfield in 2009 to make it the UK's fifth biggest grocery chain with 3,000 shops. While all its bigger grocery rivals have reported flat or anaemic sales growth this year, the Co-op seems to be faring worse, and its food profits tumbled 21 per cent to £135.4m over the 26 weeks to 2 July.

Mr Marks, who started at the Co-op's grocery business in 1967, pulled no punches in describing the pressure on UK consumers. He said: "It is the worst I have seen in over 40 years of retailing and, against this backdrop, the results we are announcing are in line with our expectations."

Overall, the Co-operative, whose other businesses include funeral care and pharmacies, posted an 11 per cent fall in operating profits to £275.1m, on sales down 1 per cent to £6.89bn over the half year.

But the financial services arm saw profits rise 20.1 per cent to £131.3m, helped by a significant increase in new current accounts. The Co-op is bidding for the 632 up-for-sale branches of Lloyds Banking Group, which would give the Co-op a network of about 1,000 outlets.

Mr Marks said: "Looking ahead, we do not see signs of any real improvement in the economy and we are planning accordingly." He added: "We will find it difficult to match the record profits we made in 2010."