CO-OPERATIVE Group Chief Executive Martin Beaumont has blamed a big slump in the society's food retailing profits on distrubution and logistical problems following the acquisitions of three convenience store chains.
The Group's interim results show half-yearly food profits down from £ 61.6 million for the equivalent period in 2003 to £ 35.8 million this year.
Sales in the Group's family of businesses have increased marginally to £ 4,254 million, but the overall consolidated profit (before exceptional items and short-term investment fluctuations in CIS) fell to £ 135 million from over £ 180 million in 2003.
As reported on thenews.coop, Co-op Bank profits fell by over £ 5 million, but continuing problems in the insurance and pensions industry saw CIS profits drop by over £ 14 million, again before exceptional items are taken into account.
On the plus side, Travelcare's profits were up £ 1.4 million; Co-op Pharmacy saw a 1.4 per cent rise to £ 7.5 million and Funeralcare increased its profits to £ 10.3 million.
Priory Motor Group remained steady with profits of £ 800,000, but the Group's non-food retail operation made a half-year loss of £ 2.8 million ? £ 800,000 up on last year.
However it is the reverse in food retailing that will cause most concern and Mr Beaumont admitted: "It's very disappointing; we are not where we want to be."
"It has become very evident that our management and distribution systems have become overstretched through the scale of acquisitions and also the merger with CRS. The acquisition strategy is absolutely right ? we would be in a hugely difficult place competitively if it wasn't for all the new stores ? but it's fair to say we are paying a higher price than we expected.
`Our infrastructure has struggled to cope with the fast pace of our expansion in food retailing over recent years, so we have not been able to respond to changing market conditions as rapidly as we needed.
`We are already taking steps to improve our consumer offer and to deliver a consistent level of service across all of our 1,800 convenience stores and this is beginning to bring improvements. However we do not expect recovery to become evident until 2005."
Mr Beaumont said that an £ 8 million investment in a new leased distribution centre near Coventry – due to be operational in June next year – would help address the difficulties, while short and medium term strategies had already been implemented.
He added: `Elsewhere across the Group, Specialist Retail turned in a solid performance, but our insurance business is in the midst of a major modernisation programme which will continue to affect profits throughout this year and into 2005. CIS remains a business with considerable potential which we are determined to deliver to members.`