Co-op Group says it 'planned' for a 50% profits drop
Profits at the Co-op Group more than halved to £17m in the first six months of the year, hit by the group's three-year plan to rebuild the business.
It has also cut the value of its 20% stake in the Co-op Bank by £45m.
The bank said in April it would remain unprofitable for about two years because of tough trading.
Co-op group chief executive Richard Pennycook said the fall in profit "was expected and planned" because of its restructuring programme.
The group announced a £1bn three-year Rebuild programme in 2014.
"We are only half way through the Rebuild and much remains to be done, whether it is investing in our digital capability or campaigning on key issues," said Mr Pennycook.
He said the group is "firmly on track" and that the work is attracting more customers back to the Co-op.
Revenue increased by 2.2% to £4.7bn as customer transactions rose by 3.3% and like-for-like food sales climbed 3.1%.
The underlying profit before tax, which excludes temporary factors and one-off items, was £31m for the six months, down from £63m in the same period of 2015.
The Co-op nearly collapsed in 2013 after the discovery of a £1.5bn "black hole" in its banking operation. But it has since sold around four-fifths of the bank and focused the business on re-establishing the Co-op as a mutual brand owned by its members.
The Co-op has scrapped its famous dividend for the duration of the revamp, but is sending out new Co-op cards to customers to mark the launch of a new membership offer, "placing customers and communities firmly at the heart of the Co-op again".
Members will receive a 5% reward every time they buy Co-op own-brand products and services, while a further 1% will go towards local causes.
"By 2018 we expect to give back £100m a year to our members and the local causes they care most about," said chairman Allan Leighton.
The group said its food business expanded faster than many of its supermarket rivals as Britain's shoppers shifted towards more frequent shopping at convenience stores.
The Co-op has around 2,600 grocery shops across the country with 30 new food stores opening in the first six months as part of 100 planned for 2016.
Underlying food profit fell to £63m from £88m in 2015, after the chain cut prices and increased workers' pay.
Staff in food stores have been given an 8.5% pay increase to take them ahead of the National Living Wage threshold.
The Co-op is Britain's fifth biggest grocer with a market share of 6.6%.
Underlying profit at the group's Funeralcare business fell to £42m from £47m in the same period 2015, although sales climbed £2m to £164m, despite the death rate falling year on year by 11,000 to 303,000.
It opened 12 more funeral homes to bring the total to more than 1,000 and said a further 200 will open in the next three years.
"We have ambitious plans to grow our funerals business over the coming years," said Mr Pennycook.
Meanwhile, it cut the price of its budget Simple Funeral by 7% to help address problems of affordability.