Co-op Shoreditch

The Co-op’s True North strategy, which includes revamping stores such as its Shoreditch location (above), is paying off, the society says

The Co-operative Group ’s food strategy True North is “bearing fruit” with a “sustained period of market outperformance” the society has revealed.

The five-year, self-funding strategy, launched in March 2013, is designed to transform The Co-op ’s food business into a convenience operator and involves revamping stores and own-label ranges, as well as improving availability, customer service and pricing.

On its key priority of pricing, The Co-op Group said in its full-year results today it had recorded “exceptional” redemption rates from a coupon offer in the last quarter of the year.

It offered members 10% off their next purchase when they spent between £5 and £100. The redemption rate was 72% - “far ahead of industry standards”, according to the retailer.

New store formats

The society started rolling out new store formats in November. It said it was “pleased with their early performance” and that its store refit programme would continue. Some 75% of its estate will be refreshed by the end of 2014.

Despite The Co-op’s commitment to sell off larger stores in order to concentrate on its core convenience estate, the society opened 32 new stores during 2013 and exchanged contracts on a further 32 that will open this year. The Co-op said a “large number” of these sites were in London where it is under-represented, and that its existing stores in the capital had “outperformed initial expectations”.

Like-for-like food sales fell 0.2% in the year to 4 January 2014. However, helped by True North, like-for-likes rose 0.6% in the second half of the year. In its core convenience estate, like-for-likes rose 1.6% over the 12-month period, and by 5.3% in the second half.

Total food sales and profits were hit by store disposals and price reductions. Sales fell 2.7% from £7.44bn to £7.24bn, while underlying operating profit fell 8.2% to £247m.

However, due to goodwill impairment charges relating to The Co-op’s acquisition of Somerfield in 2009, the food business recorded an operating loss of £35m.

“In our biggest business, food, we continue to make progress on our True North strategy, a key aspect of which is to focus on reducing prices for our customers,” said The Co-op Group chairman Ursula Lidbetter.

“The development of the convenience estate is ongoing with plans to launch over 100 new convenience stores this year.”