(Adds details, quote)
LONDON Jan 8 (Reuters) - Britain's troubled Co-operative Group posted a 1 percent rise in like-for-like sales in its Christmas quarter, helped by a strong performance at its smaller convenience food stores in the key trading period.
The Co-op, a well-known high street presence for its bank and supermarkets, was hit last year by a capital crisis at its bank and an ensuing scandal over the unit's former chairman who was arrested as part of an investigation into the supply of illegal drugs.
Co-op Bank has since fallen under the control of bondholders including U.S. hedge funds after the 1.5 billion pound ($2.5 billion) capital shortfall was exposed.
Despite these problems the group, which in addition to its stores also sells a wide range of services from funerals to legal advice, said underlying sales were up 1 percent in the 13 weeks to January 4, fuelled by strong trading at its smaller convenience food stores, which posted growth up 3.2 percent.
It said sales in the three weeks to Jan. 4 were particularly strong, with core convenience stores reporting like-for-like growth of 5.4 percent.
"Looking ahead, we believe that our core convenience stores should continue their strong performance," Steve Murrells, the Co-op's chief executive of retail at the Co-op, said.
All of Britain's major grocers have adapted in recent years to operating more small local stores to appeal to those consumers who prefer to buy little and often and to do so around the corner rather than going to out of town superstores.
Euan Sutherland, group chief executive, said the strong food sales reflected the loyalty of its customers despite the headlines about the problems at its bank. (Reporting by Kate Holton; Editing by Greg Mahlich)