Discounters and deflation puts freeze on Iceland
ICELAND Foods, the privately-owned grocer based on Deeside, has seen sales and profits hit hard by competition from low cost rivals such as Aldi and Lidl.
The company, led by charismatic entrepreneur Malcolm Walker, said earnings in the 52 weeks to March 27 were down 25% at £150.2m on sales of £2.69bn, down 0.5% on the previous year.
Mr Walker said the company had had to respond to several significant challenges with new product innovation and the launch of a new Food Warehouse store concept.
“This has been an exceptionally challenging year for the group, and for the UK food retailing industry as a whole. In the face of food price deflation, intense competition and significant change in consumers’ shopping habits, Iceland has continued its long tradition of successful reinvention.
“We have done this by developing a new store format, launching new product ranges, upgrading packaging, rethinking marketing and initiating a major productivity programme. The benefits began to become evident in a more encouraging underlying sales and profit performance towards the end of the year, which has put us in a stronger position to face the continuing competitive challenges in the year ahead.”
Iceland said its like-for-like sales had fallen 4.4% in the period, reflecting a “reduction in customer transactions, food price deflation and the cannibalisation effect of new store openings.” This was largely offset by sales generated by the 43 net new stores opened during the previous financial year and the further 28 net new stores opening during the period under review.
Adjusted EBITDA was £150.2m (2014: £202.2m) as a result of the sales performance, investment in price cuts, additional marketing expenditure, and costs associated with the roll-out of our online business and international expansion
During the year Iceland completed a £950m refinancing on the bond market. Costs associated with this deal (£53.8m) account for the majority of the £59m in exceptional administrative costs the business accrued.
At the end of the financial period the group ended the year with 872 stores (2014: 844) of which 859 were in the UK.
This financial year the retailer said it expects to open up to 20 new Iceland stores in the UK and the Republic of Ireland, with a focus in the UK on securing suitable new sites for the expansion of The Food Warehouse – which is typically more than twice the size of a standard Iceland store.
