CO-OPERATIVE Group Chief Executive Martin Beaumont has said there can be no excuses for the disappointing food retailing results announced in the half-yearly report.
Food profits were down from £ 61.6 million for the equivalent period in 2003 to £ 35.8 million this year.
Mr Beaumont told last Saturday's half-yearly meeting (23rd October) in Manchester: "I've got no intention of making excuses about our performance, or indeed promising a miraculous turnaround in a few weeks time, because I've got no doubts about the scale of the challenge we face."
But he insisted again that Group's aggressive acquisition strategy was and is the only realistic option to ensure long-term profitability and sustainability in an increasingly competitive market place.
Said Mr Beaumont: "Our food like-for-likes for the last 12 months are less than the market and a little below the average for other retail societies, which gives a clue to what might be causing some of the problems.
"Of course, in food in general and convenience in particular, competition is ratcheting up, as the majors gobble up smaller chains. And that means the cost of acquiring new businesses is becoming increasingly prohibitive."
He explained that the Group now operates around 1,800 food stores compared with 600 four years ago and pointed out that if the society was just starting out on the acquisition trail, things would be far more difficult.
"The answer to anyone who asks ?were we right to acquire so much so fast?', is ? yes, absolutely. Without them, our position in the long term would be far weaker," said Mr Beaumont.
But the sheer pace of growth had, he said, also highlighted some problems at the root of the disappointing interim results.
Mr Beaumont admitted that the task of absorbing the acquisition stores had been a bigger challenge than expected and had stretched resources to the limit.
He told the meeting: "I have spoken before about our historic under-investment in logistics and systems, which have also struggled to cope with extra demands. We are tackling those things and the creation of a new national distribution centre at Coventry for slow moving lines, which is due to open next summer, will free up capacity in the rest of the network.
"In the meantime, there is much we can do with the current systems to get better on-shelf availability, as well as to improve ranging and reduce leakage, especially in the Alldays stores.
"We're also looking at the balance between pricing and the dividend loyalty card, to see whether now is the time to invest more in pricing and less in loyalty card."
Mr Beaumont said price competition had affected margins, but suggested that was only part of the story as a number of operational issues had caused the reduction in profitability, though he claimed key product and promotional product availability is now improving, as is the reduction in leakage and wastage levels.
Mr Beaumont accepted that, in the past, insufficient regard has existed for the views and requirements of field and store management and their staff.
Offering some ?good news' to members, Mr Beaumont said that although like-for-like sales were down by a whisker, this masked a big difference between stores which have been refitted where there is "good positive growth" and those which haven't ? or were last refitted several years ago ? and where the balance between packaged grocery and chilled and fresh products is out of step with changing customer requirements.
Mr Beaumont said the Group has been piloting a new convenience concept sector which involved a radical overhaul and updating of ranging.
He said: "Pilot stores in Sale, Manchester, and at Adle, Leeds, were launched in June and both are showing sales 40 per cent up, thanks mainly to fresh foods. Another, at Kentish Town, has now joined them and we plan to extend the pilot to more stores over the next few months."