Grocery sales at The Co-operative Group have performed poorly as profit fell by 39% to £74.5m for the year to January 8.

Group chief executive Martin Beaumont blamed internal issues as much as increased competition, as like-for-like sales dropped by 1% to £3.4bn over the year.

Beaumont said that the difficult market conditions coincided with operational difficulties after a period of very rapid growth in the past four years. Beaumont said the infrastructure and logistics have not been able to cope.

Store numbers have trebled in that time to 1,800, with a further 64 convenience stores added to the portfolio this year with the acquisition of Conveco.

“We said at the half year that 2004 would be a difficult year for the Co-operative Group, and today’s results confirm that,” said Beaumont. “There are early signs that the remedies we put in place in the second half of the year are beginning to take effect, with improvements in a number of key areas, and we are confident that we will see further gains coming through later in 2005.”