Co-op fights to halt decline

The Co-op hopes that a ¿7m TV advertising campaign will help to it to claw back bigger profits

Britain's biggest retailer has announced its fourth annual fall in profits.

Co-op sales rose to £8.2bn last year, an increase of less than 3% against the previous year's £7.9bn.

Trading profits, however, fell from £135m to £118m.

Growing competition, coupled with losses at its CRS offshoot, were blamed for the decline.

Co-op: Retailing pioneer

Although the Co-op's sales are dwarfed by the likes of Tesco and Sainsbury, it is still the country's biggest retailer, with 4,500 outlets, from hypermarkets and department stores down to small local convenience shops.

It is also the UK's biggest undertaker, a major petrol retailer, and runs a chain of chemists and travel agents.

In addition to the two largest retail societies, the CWS and CRS, the Co-op also takes in 46 independent regional and local societies.

Under pressure

However the Co-op is coming under increasing pressure from the supermarket giants on one front and the out of town retail parks on another.

Following a strategic review of its food stores it has decided to focus its business on convenience stores which make up almost a third of total food shopping.

Can shoppers be persuaded to spend at the Co-op

John Bowes, marketing manager CWS, said: "What we have found is that our particular strengths are in relation to our convenience stores and market town stores.

"That is very much the direction we will be taking our business from now on.

"We are focusing on those particular type of outlets, spending a lot of money refurbishing them.

"We are planning quite a number of acquisitions over the next two or three years to boost the store numbers and to fully establish ourselves as market leaders in the convenience store sector."

The Co-op hopes its new strategy and a £7m TV advertising campaign will help to reverse the decline in profits and claw back its share of the food market which dipped from 6.8% to 6.4% last year.

It follows speculation about the Co-op movement's future in the wake of last year's vigorous defence against a possible takeover bid by City financiers led by Andrew Regan.

Experts critical

However industry analysts still have their doubts.

Robert Clark of Corporate Intelligence said: "I don't think it will necessarily reverse the decline. That marketplace is becoming more competitive. We have got the petrol forecourt shops, the superstores opening all hours, other companies, it is very competitive."

Robert Clark: Sceptical about strategy

Richard Hyman, analyst at retail consultants Verdict said: "I think there is a future for the Co-op in the short to medium term because of its sheer size.

"It still represents a large chunk of consumer spending, but it is a diminishing slice and it is very difficult to see it stop diminishing.

"But two surprising things happened last year. First, someone tried to buy the group and second, it put up a dynamic defence to repel the suitor. What if they could bring that force and dynamism to their daily operations?"