Co-op Hands Pennycook Permanent CEO Role in Revival Pursuit

Co-operative Group Ltd., the U.K. customer-owned retailer whose future was placed in jeopardy by losses at its banking unit, named industry veteran Richard Pennycook as its permanent leader six months after he stepped into the chief executive officer role on a temporary basis.

Pennycook, who has more than two decades of experience at consumer businesses including grocer Wm Morrison Supermarkets Plc and retailer Laura Ashley Holdings Plc, is taking the CEO post immediately, Co-op said today in a statement.

Co-op, based in Manchester, England, is seeking to implement a turnaround after plunging to a loss of 2.5 billion pounds ($4.1 billion) last year and giving up control of its banking division to help plug a capital shortfall. Since taking on a caretaker role after the resignation of former CEO Euan Sutherland, Pennycook has overseen disposals including the company’s pharmacy chain and security business Sunwin.

“We have taken major steps forward over the last six months, securing governance reform and repairing the balance sheet, but we have much to do to return the group to full financial health,” Pennycook, 50, said in the statement.

The CEO, who joined Co-op last year as finance director, today reported a decline in earnings for the first half of this year. Operating profit slid to 43 million pounds from 105 million pounds a year earlier, the company said. Net debt was 1.4 billion pounds, unchanged from the end of last year.

Disposal Proceeds

The company has raised about 900 million pounds from the disposals and about half of the proceeds will be used to pay down debt, while the other half will be reinvested in the business, Pennycook told journalists on a call today.

The CEO said he will reveal detailed plans and structures for the group when the company announces annual earnings “around March.”

The food business, Co-op’s largest, has “a lot of work to do on ranging and availability,” Pennycook said. Even so, it has a “well-developed strategy which is very focused on neighborhood, community and convenience retail.”

Sales at food stores open more than a year increased 1 percent in the first half, with a 4 percent gain at the core convenience chain. The grocery business intends to open 100 new stores by the end of the year, refit 300 outlets and add 800 new products.

In addition to the grocery business and banking, Co-op sells funeral services, insurance and legal services.

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