Co-operative Group agrees to sell 36 ex-Somerfield stores

The Co-operative Group has agreed to sell 36 former Somerfield stores as it sharpens its focus on convenience shopping.

The mutual said Somerfield Stores Limited and its non-core property portfolio had been bought by the Food Retailer Group, an arm of business restructuring specialists Hilco Capital.

It said the move would not lead to store closures or redundancies, with 920 staff moving over to the new company under a TUPE transfer agreement.

The sale comes amid speculation last month that the firm had earmarked about 300 stores from a "non-convenience" estate of 700 shops which it may put on the market.

The Co-op sold off 91 food stores last year, raising £175 million, because they no longer dovetailed with its "focus on convenience shopping".

Steve Murrells, chief executive of Co-op Food, said: "It is essential that we have a proactive property programme in place to support our long-term growth strategy and this sale aligns with that approach."

The stores will be rebranded as Budgens as part of the deal, which is expected to be complete by July.

The Co-op said it would make a profit on the back of the sale, but would not disclose details of the transaction.

The firm opened 97 new stores last year and is pressing ahead with plans to open 100 new food stores and refit 150 existing shops by the end of 2016.

Earlier this year, grocery analysis body Kantar said the Co-op's sales rose at their fastest rate since it snapped up Somerfields in 2011, climbing 3.9% in the 12 weeks to March 27.

The mutual also revealed in March that like-for-like sales across its 2,800 food stores grew by 1.6% in the 52 weeks to January 2, while its funeral business saw sales climb by 9.9%.

It said core convenience like-for-like sales grew 3.8% last year, driven by investment in prices and products.

Underlying profits in the food business also rose 3.3% to £250 million as strong sales and moves to cut costs boosted performance.

But annual pre-tax profits hit £23 million, down from £24 million in 2014 when it was boosted by a £121 million one-off disposal.

The results came as chief executive Richard Pennycook demanded the firm slash his pay after the group finally ''turned a corner'' thanks to rising sales.

He asked the board to reduce his base salary from £1.25 million to £750,000, while his total pay, including bonuses, will drop by more than 60%.

A spokesman for The Food Retailer Group said: "The change in ownership will not impact daily business and stores will continue trading as usual. All employees will transfer with the business, and there are no planned redundancies."