The Co-operative Group reported the worst retail trading conditions “in 40 years” as it recorded a 12% drop in underlying profits for the first half of this year.
Co-op group chief executive Peter Marks said: “We do not see signs of any real improvement in the economy and are planning accordingly.”
The group reported an underlying profit of £230 million for the six months. The group’s businesses other than food and financial services contributed an underlying operating profit of £70 million. However, the group gave no figures on the performance of its travel division which will merge with Thomas Cook and the Midlands Co-operative over the next month following Competition Commission clearance.
The Co-operative Travel made an operating profit of just £100,000 last year. The Co-op’s other businesses include the Co-operative Pharmacy, Funeralcare, Legal Services, car dealerships and clothing as well as travel.
In a statement, the group said: “The UK and the world economy remain in a highly fragile state. Our customers are feeling the squeeze and, inevitably, we are seeing an impact on sales. The economic environment is particularly challenging for those businesses that rely on ever-tightening discretionary spend.”
Marks said: “We warned that the downturn was biting deeper than anyone had expected and predicted challenging trading conditions would continue into 2012. This has clearly proved to be the case. Indeed, it is the worst I have seen in 40 years of retailing.”
The deal with Thomas Cook guarantees the Co-operative Group a minimum dividend from the travel retail business of £10 million a year for the next four years, with a subsequent option for either partner to buy out the other.