Profits were slashed by £37m at the Co-op during the first six months of its financial year as its sales flatlined, new figures have revealed.
The group has posted pre-tax profits of £7m for the period to July 2, 2022, compared to the £44m it achieved during the same time in 2021. It also reported its revenue stalled at £5.6bn.
The results come after the Co-op announced in July plans to cut 400 jobs, with the majority based at its head office in Manchester.
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The group blamed a "tough trading environment" for the move as well as the rise in inflation. It also said will bring forward planned cuts as well as reduce roles by not filling vacancies.
In a statement, the Co-op said that "decisive management action" had been taken to reduce operational costs, improve operational performance and prioritise capital expenditure.
It added that its net debt had been reduced through improving its cashflow. The group also said its deal to sell 129 petrol stations to Asda for £600m would also help drive down debt.
On its sales, the group said that in "very challenging markets" it delivered a "robust" performance while Co-op Food revived its market share to 6.5%.
It also revealed that energy and wage inflation increased costs by around £50m compared to the same six months in 2021 before "mitigating cost savings, and rates holidays in H1 2021 create a further £20m adverse variance".
The Co-op added that it expects cost savings to reach £150m in 2023.
Chief executive Shirine Khoury-Haq said: "Against a highly challenging economic backdrop, we have made significant progress in strengthening our balance sheet, whilst continuing to support the needs of our colleagues, members, customers and the communities in which we operate.
"Our clear focus on developing our businesses, whilst controlling costs, improving our cash-position and reducing debt is paying dividends.
"Looking ahead, while we are mindful of the continued economic challenges, we have great confidence in the underlying strength of the Co-op and all our businesses.
"Having faced into some tough decisions in the first half, focused on cutting costs and improving efficiency, we ended the period stronger both operationally and financially.
"Since then, we have progressed further with the planned sale of our non-core petrol forecourts business. This will strengthen us more and provide the means to invest in our core businesses, whilst enabling us to support our members, customers, colleagues and communities through the cost-of-living crisis.
"I’d like to thank every single one of our colleagues for their leadership in delivering our results and vision this year."
The Co-op said it had pledged to improve the pay of 41,000 front line employees of up to 5.3% while a £37m project has started to lower the prices of 120 "key products".
The half-year results come after the Co-op's profits slumped by £135m during its previous financial year.
Chairman Allan Leighton added: "The first six months of the year have been a time of challenge for us – as they have been for all businesses.
"I was delighted that we were able to confirm Shirine Khoury-Haq as our permanent CEO during this period.
"Her energy to move decisively on improving our financial position, focusing on core business development, whilst still delivering on our vision commitments, is helping us move forwards with pace and purpose.
"We know that the current testing conditions will not ease in the second half, and we will continue to face into the challenges, by remaining focused and by building upon our incredible co-operative heritage.
"I would like to thank all our colleagues for their hard work and dedication in these extraordinary times."
On its future outlook, the group said: "Co-op expects to face continued challenges during the year, given the persistent inflationary pressures, which is likely to prolong economic uncertainty amongst consumers and businesses alike.
"We are, however, due to the management actions taken in H1 better equipped to weather the effects of these immediate pressures, whilst equally confident in our underlying business strength and longer-term prospects.
"The board remains confident in the strategy, with a focus on driving growth through our established routes to market, maintaining financial discipline and continuing to deliver against our vision of co-operating for a fairer world."
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