Co-Op profit boosted by food sales

LONDON (Reuters) - The Co-Operative Group, Britain's biggest mutual retailer, posted a 36 percent rise in first-half operating profit, driven by a strong performance in its food business, it said on Wednesday.

The group, which is strengthening its position as Britain's fifth-biggest food retailer by buying rival Somerfield, said it made an operating profit of 191.1 million pounds in the 28 weeks to July 26.

This included a 68 percent rise at the food business to 126 million pounds, where like-for-like sales rose 5 percent, outperforming market growth of 4.6 percent, it said.

"It is clear that the rest of this year and quite possibly much of next year will be tough, because of the wider economic environment," Chief Executive Peter Marks said in a statement.

"The credit crunch, the ongoing slowdown in the housing market, food price inflation and energy cost rises will weigh on all businesses and our sector will continue to be as competitive as ever," he added.

The Co-Op, which employs 85,000 people, has 3 million members and more than 4,300 retail outlets, is also Britain's third largest retail pharmacy chain, the number one provider of funeral services and runs a large travel business.

(Reporting by Mark Potter; Editing by David Holmes)