The Co-operative Group has announced its intention to sell or shut its 36 department stores after the unit suffered large losses last year.

Co-op will close ten of the stores but aims to sell off the remaining 26 before February 2007, after which it will result to closing them.

71 full-time and 70 part-time workers will be axed with the first round of closures, and a further 491 full-time and 379 part-time employees will be laid off if Co-op is forced to shut the rest of the chain.

The decision comes as part of a move to concentrate on the group's key businesses, including its food stores and pharmacies.

Co-op deputy chief executive Paul Hewitt said a review had concluded that: "a complete exit from the sector, disposal of the stores and the re-investment of the proceeds into core businesses was the only commercial option".

Co-op lost more than £4 million last year.