Profits at the Co-op collapsed as it was buffeted by soaring energy bills and rising wages.
In an update that underlined the challenge facing British businesses, the supermarket and funeral care firm said profits fell 84 per cent to £7million in the six months to July 2.
The slide came despite revenues holding firm at £5.6billion.
Costs crunch: Co-op, led by Shirine Khoury-Haq (pictured) said profits fell 84% to £7m in the six months to July 2. Revenues held firm at £5.6bn
Co-op chairman Allan Leighton, one-time boss of Asda and former chairman of Royal Mail, said: ‘The first six months of the year have been a time of challenge for us, as they have been for all businesses. We know that the current testing conditions will not ease in the second half.’
The group was hit by soaring energy bills and the need to pay higher wages, pushing costs up £50million compared with the same period last year.
Revenues at the food business edged up 1 per cent to £3.9billion but profits slipped as costs rose.
The Co-op has a 6.5 per cent share of the UK grocery market, making it the seventh biggest player behind Tesco, Sainsbury’s, Asda, Morrisons, Aldi and Lidl.
The market is fiercely competitive as supermarkets battle to keep prices low and win customers off rivals.
Aldi has now overtaken Morrisons to become the fourth-biggest grocer in the UK.
Against this backdrop, the Co-op says it will invest £37million in a food strategy shake-up.
This will include price reductions across 120 popular own-brand products, and renewed focus on convenience stores.
Shirine Khoury-Haq, who was appointed chief of the group this year, said: ‘As we face into a cost of living crisis we are determined to make life fairer for our members, customers and communities in these extraordinary times, and lowering prices for shoppers is the first step in our strategy.’
Co-op group, which includes an insurance arm as well as funeral care and food, said it was taking ‘decisive’ action to cut costs and reduce its debt. It is looking to save £100million this year and £150million in 2023.
Khoury-Haq said: ‘Against a highly challenging economic backdrop, we have made significant progress in strengthening our balance sheet.
‘Our clear focus on developing our businesses, whilst controlling costs, improving our cash position and reducing debt, is paying dividends.’
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