Co-op says winning in banking

 

The Co-operative Group, Britain's biggest mutual retailer, said consumers' lack of trust in banks and the popularity of convenience food shopping would help it win custom this year despite a tough trading climate.

The group, whose businesses span food shops, financial products, pharmacies and funeral services, said on Thursday profit before payments to members jumped 85 percent to 402 million pounds in the 51 weeks ended January 2.

That was boosted by the purchase of Somerfield food stores in 2008 and a merger with the Britannia Building Society.

Underlying profit rose 20 percent, and chief executive Peter Marks was confident the group could continue to deliver growth around that rate despite a gloomy outlook for consumers.

He said there was a "flight to trust" in the banking sector as consumers shunned listed banks in the wake of the financial market crisis, adding the Co-op won 150,000 new current account customers last year, doubling its market share to 4 percent.

The Co-op's specialist grocery market of convenience food shopping was also a growth area, despite sales at stores open at least a year slowing to "fairly flat" in the first two months of this year, he told reporters on a conference call.

Marks joined a raft of retailers warning that trading conditions would be tough at least until the end of this year.

"There's light at the end of the tunnel, but it's very faint and flickering sometimes. 

"We've got a general election, which unsettles people, we've got unemployment continuing to rise, and we've a massive budget deficit that needs to be tackled, although hopefully not too aggressively and too soon" he said.

"All of those things will mitigate against the consumer having a lot of confidence in going out to spend."

NEW MEMBERS

Marks said the Co-op, which pays out a dividend to members depending on how much they spend with the group, recruited 1.5 million new members last year, or around 500,000 excluding the merger with Britannia, taking its total to about 5 million.

The members will share a dividend of 55 million pounds, up 16 percent on the year.

The Co-op, which traces its roots to the founding of the co-operative movement in Rochdale, northwest England, in 1844, said group sales rose 31 percent to 13.7 billion pounds.

Like-for-like sales at grocery shops rose 5.5 percent.

That growth had disappeared in recent weeks due mainly to a steep decline in food price inflation, but Marks said the Co-op, Britain's fifth-biggest grocer, was holding on to market share.

He saw little risk of food price deflation in the coming months, due in part to recent weakness in sterling, but also saw little prospect of a return to inflation. 

His comments echoed those of bigger rival J Sainsbury, which told Reuters last week that household budgets in Britain were likely to come under more strain this year than last.

Sainsbury reports fourth-quarter sales data next Thursday.