3663 First For Foodservice is set to close two depots after profits fell by a quarter in the second half of 2008.

Chief executive Fred Barnes said the business was feeling the effects of the economic downturn as consumers ate out less and profit margins were put under pressure.

Barnes told The Grocer that depots in Coventry and Newcastle would be closed as part of a "rigorous cost reduction exercise being carried out throughout the business". But he scotched rumours a further depot in London was also set to close.

"It's tough out there - our customers are hurting and so are we," said Barnes. "They are feeling the pressure and are coming to us looking for savings, efficiencies and cost elimination. We are feeling their pain. Sales are level but margins have been hit - we are making 75% of the profit we made last year. We have not been in such challenging circumstances - ever."

Barnes said the company was now being forced to make cost savings to improve profitability. He said the business' distribution arm, which made a loss in the final six months of 2008, had been hurt by the rise in petrol prices and dropping volumes but would return to profitability in the first half of 2009.

The news marks a second wave of depot closures in less than a year for 3663. Sites in Wakefield and Southampton were closed in August and October respectively, while butchery business The Barton Meat Company shut in January.

Barnes said 3663 was working closer than ever with customers to save them money and help them to offer value. The company also aimed to sell a greater range of products to its customers and had introduced a new 30-line value range of staples to meet demand.

Barnes said the moves - and the company's relatively small debt - meant 3663 would emerge from the recession stronger. "We have a good market position and a good proposition," he said. "The economy is doing badly but we will emerge into a period of enormous opportunities."