Co-op’s full year food like for like sales up by 1.6%

The Co-op Group saw food like for like sales rise by 1.6% in the full year to 2 January with like for like volumes up 5%.

The Co-op said its core convenience business grew ahead of market after investment in price and products, with like for like sales up 3.8%. On a two-year basis, convenience like for like sales are up 7%.

Underlying profit for its food division rose by 3.3% to £250m, driven by strong sales and cost efficiencies and despite a £125m investment in lowering food prices.

During the year it opened 97 new food stores, taking its store estate to over 2,800 stores. Another 264 stores were also refitted during the year.

Overall group revenues edged down to £9.3bn from £9.4bn last year. Group underlying profit before tax rose by 11% from £73m to £81m, but pre-tax profit plunged more than 80% from £124m to £23m “reflecting major investment in the business” in 2015 and profits in 2014 being bolstered by a one-off gain of £121m from disposals.

Group underlying operating profits in 2016 are expected to be lower than in 2015 due to continued investment in its “rebuild” programme, which in its first year of the three-year plan saw capex rise from £294m to £320m.

Chief exec Richard Pennycook said: “This has been a year of further progress at the Co-op as we have invested to drive the growth of our businesses. Underlying profits have increased but our priority this year has been on putting the building blocks in place for the long-term. Whether it’s our investment in lowering prices, rewarding colleagues or campaigning on key issues, we are taking the right steps and the performance of our businesses and the feedback from our members shows us we are on the right track.

“We are, however, only one year into our Rebuild and whether it is driving further growth in our businesses, improving member engagement or getting back to our campaigning roots, there is still much to achieve.”

Meanwhile, The Co-op has announced Lord Victor Adebowale will become an Independent non-executive director, effective from 6 April 2016. Lord Adebowale is chief executive of Turning Point, the health and social care organisation and a non-exec director of NHS England. Also Ian Ellis, group CFO, has also been appointed to the group board with effect from 6 April 2016, taking up the previously vacant executive position on the board.

Morning update

The other big news this morning is the Marks & Spencer (MKS) fourth quarter update, which has revealed another large drop in general merchandise sales.

Overall, group sales were up 1.9% for the quarter after another solid performance of its food division. Food sales were up 4% in the quarter, though this translated to flat like for like sales. Clothing and home sales were down 1.9% and down by 2.7% on a like for like basis.

During the quarter M&S opened 80 new stores in the year, with the new store opening programme “performing ahead of expectation”. As a result it grew our market share to 4.3%.

In clothing and home it “faced a challenging backdrop characterised by price deflation and a flat market”, but also began to reduce the proportion of sales on promotional discount and will continue to do so.

International sales were up 3.8% in the quarter.

Newly installed CEO Steve Rowe said: “I am very proud and privileged to be leading M&S. We are focused on getting even closer to our customers and putting them at the heart of everything we do.

“We had a mixed performance in the final quarter of the year. Our food business once again outperformed the market by 3.5% pts. Although the sales decline in Clothing and Home was lower than last quarter, our performance remains unsatisfactory and there is still more we need to do.

“Turning around our clothing and home business by improving our customer offer is our number one priority.”

M&S shares have opened up 1.9% at 428.4p after the general merchandise sales were less bad than feared - with some predicted a sales fall of 3%-plus before the update.

The FTSE generally has continued where it left off yesterday, rising another 0.4% to 6,186pts so far this morning.

Early movers include Applegreen (APGN), up 2% to 383p, FeverTree Drinks (FEVR), up 1.5% to 654.5p and Sainsbury’s (SBRY), up 1.4% to 283.6p.

Fallers include PureCircle (PURE), down 3.7% to 366p, McColl’s Retail Group (MCLS), down 2.8% to 165p, Hilton Food Group (HFG), down 2.5% to 530p and Ocado (OCDO), down 1.9% to 334.9p.

Yesterday in the City

The FTSE 100 rebounded from Tuesday’s falls yesterday, rising 1.2% back to 6,161.6pts as the scrapped Pfizer/Allergan drug merger drove up the pharma sector.

Most grocery stocks were driven higher by the improved market sentiment, with Premier Foods (PFD) again one of the day’s key movers.

Premier ended the day 5.4% higher at 58.5p after it revealed late in the day it had held “constructive” talks with potential bidder McCormick and was set to meet major institutional investors over the coming days.

Marks & Spencer rose by 2.8% to 420.4p ahead of this morning’s Q4 trading update, which was forecast by some to reveal worse general merchandise sales figures than it did.

There were also strong rises at B&M European Value Retail (BME), up 3% to 269.9p, Greencore (GNC), up 2.7% to 390.5p, Compass Group (CPG), up 1.9% to 1269[ and Unilever (ULVR), up 1.7% to 3242p.

The supermarkets had a better day after their post-Kantar falls on Tuesday, with Tesco (TSCO) bouncing back up 2% to 191.5p and Morrisons (MRW), up 1.5% to 203.1p. Sainsbury’s, which avoided the worst of Tuesday’s falls, was up 0.5% to 279.7p.

Other retailers also had reason for cheer, with McColl’s (MCLS) up 4.1% to 169.8p and WH Smith (SMWH) up 1.8% to 1876p.