East of England Co-operative Society has blamed increased competition in the grocery sector and increasingly tight household budgets for a 14.2% drop in half-year profits.

Underlying trading profit fell from £3.6m to £3.1m in the 28 weeks to 9 August, the society said. Total sales were flat – up 0.2% to £185.8m.

Sales in the society’s food stores fell 1.4% during the period, while sales in its larger stores were down 3.9%. Like-for-like sales declined 2.2%.

“Increased competition in the food retail market reduced our profits. We also sacrificed margins in favour of helping our customers food budgets go further,” East of England Co-op said in its interim report. “These factors were compounded by increased distribution costs and the lack of corporate dividend from The Co-operative Group.”

“We expect the challenging market conditions, intense competition and the rapid pace of change in retailing to continue during 2014/15. These pressures on our sales and margins will reduce profitability,” it added.