The Co-operative Group plans to open at least a further 120 grocery shops this year after profits rose more than fivefold, but told the government that “layering costs” on retailers could hit high streets and communities.

The mutual, which owns more than 800 funeral parlours and an insurance and legal advisory business as well as operating more than 2,000 convenience shops, said changes to employers’ national insurance contributions (NICs) and packaging regulations were expected to add £80m to its costs this year. It also lost £80m to shoplifters last year despite spending millions on new security measures.

The business is introducing technology including electronic shelf-edge pricing and expanding its fast-track online grocery deliveries – where sales soared 46% last year to £460m – to help offset higher labour costs.

The Co-op’s chief executive, Shirine Khoury-Haq, said: “We understand the government has a tough job, but it should look at layering of costs on the industry so it doesn’t tip over the balance and impact high streets.”

She urged ministers to do more to protect small business from business rates and retail crime and costs such as increases in national insurance payments and new recycling schemes that “stack and layer on smaller businesses”.

The Co-op’s profits jumped to £161m in the year to 4 January, from £28m a year before, as sales rose to £11.3bn, up 1.5% year-on-year. Food retail sales rose nearly 2% to £7.4bn, a pace of growth lower than the rate of inflation amid a tough convenience market as shoppers tried to rein in spending on little extras. Funeral services revenue rose 2.8% to £289m.

Khoury-Haq said the Co-op’s food business was “insulated” from the effect of new US trade tariffs because of its focus on buying British, but she had “real concern around consumer confidence as we see inflation coming through, rising energy costs and mortgages continuing to rise” and also “concerns about costs on wider businesses and communities and high streets”.

The Co-op said food costs continued to rise, although at a lower rate than in recent years. It invested £88m last year in keeping prices down for its members – who get special prices – and has announced it will match Aldi prices for members on key products.

Special offers, including lower prices on food and early booking for tickets to the Co-op Live arena in Manchester, helped the business increase its membership by just over a fifth to 6.2 million last year, with the aim of reaching 8 million by 2030.