Scotmid, the cooperative empire with 350 outlets and 5000 staff, has maintained its half-year operating profit at close to last year’s level despite the competitive pressures in its core convenience store market.

But it says next year’s introduction of the Living Wage will tighten the squeeze on its cost base.

The Edinburgh-based group has reported a £2m profit and says it has remained “ahead of the sector” in its trading, against a background of an average 3.3 per cent monthly retail sales decline reported by the Scottish Retail Consortium.

John Brodie, chief executive, said the final month in the society’s half-year was July which had seen a 4.9per cent sales crash across the sector, the worst on record. “You just need to think back to the weather at the Open golf,” he commented. “Our Semichem campaign was summer sun and the food shops were planning to sell selling barbecues.”

He added: “In the context of the poor early summer weather in Scotland and the challenging retail market this has been a good performance from our retail trading businesses.” August and September had been more “business as usual”, he added.

He said the group’s food convenience business continued its programme of differentiation, including a trial of an expanded ‘food to go’ range in three Edinburgh stores.

Mr Brodie said the food retail sector in the UK was “one of the most competitive market places in the world” with multiples, discounters and independents still contesting the convenience store territory.

He said discount pharmacy chain Semichem’s core stores had benefitted from the introduction of new products and supplier partnerships delivering lower prices on branded goods.

“Tough decisions continue to be taken on loss-making stores but it is pleasing to report that a number of unprofitable stores were saved from potential closure through robust lease negotiations,” Mr Brodie said.

He went on: “Looking forward, the timing of the introduction of the Living Wage is much earlier than anticipated and its introduction in 2016 represents a major challenge for the society.

“We will therefore accelerate efficiency and continuous improvement measures which will be required to ensure that the society remains in a strong position, continuing to innovate, with a clear focus on delivering long-term sustainable effectiveness in everything we do.”

Mr Brodie commented that big retailers had responded to the wages issue in different ways. “We have to look at the terms and conditions of employment as a whole, it needs to be taken in the round. We are now working through the process of what it actually means for a Scottish-based small store operator.”

Scotmid will this weekend absorb another smaller society, the Seaton Valley Cooperative with five stores in northeast England, following last year’s takeover of the Penrith society in Cumbria with nine stores.

It said its funeral business had made a strong start to the year showing growth relative to a weaker first half in early 2014., while property continued to deliver positive results with last year’s investment programme driving growth in rental income.