UK's Co-op Christmas sales boosted by new membership scheme

LONDON (Reuters) - Britain's Co-operative Group (42TE.L), the mutually-owned supermarkets to funeral services group, enjoyed strong trading in the final quarter of 2016, it said on Wednesday, hailing the positive impact of a new membership scheme.

The Co-op nearly collapsed in 2013 after a 1.5 billion-pound ($1.9 billion) funding "hole" was found in its banking operation. But it has recovered under Chief Executive Richard Pennycook, aided by the shift in Britons' grocery shopping habits towards more frequent trips to smaller convenience stores.

In September, Pennycook launched a new membership scheme targeting the recruitment of one million additional members and the handing back of more than 100 million pounds a year from 2018 to members and their local communities.

Through the scheme, Co-op members receive a 5 percent reward for purchases they make on own-brand products and services, with a further 1 percent directly benefiting local causes.

The mutual said underlying sales in its core convenience supermarket estate increased 4 percent year-on-year from Sept. 21 to Dec. 31, with total Co-op food like-for-like sales up 3.4 percent.

The Co-op is Britain's fifth largest grocer with a 6 percent market share, trailing Tesco (TSCO.L), Sainsbury's (SBRY.L), Asda (WMT.N) and Morrisons (MRW.L).

It said direct motor insurance sales increased 17 percent in the period year-on-year, while sales of pre-paid funeral plans were up 73 percent.

The Co-op said the success of the membership scheme, with 400,000 new members in the four months since launch, had prompted it to accelerate its recruitment plans. The target for one million new members has been brought forward to the end of 2017. It currently has 4.1 million active members.

Last week, Morrisons and Sainsbury's reported better than expected Christmas trading, while Tesco also reported solid numbers.

($1 = 0.8123 pounds)

(Reporting by James Davey; Editing by Mark Potter)