Sales Continue To Fall At Iceland But New Marketing, Products And Store Formats Helping With Turnaround

Iceland Foods has revealed that its like-for-like sales slipped 2.7% in the 52 weeks ended 26 March 2016 amid an “extremely challenging” UK market place. However, the figure was improvement on the previous year’s 4.4% slump with the group highlighting its success with a new store format, its ‘Power of Frozen’ marketing campaign, and new product ranges.

Overall turnover for the period edged down only 0.8% to £2.67bn, benefitting from sales generated by new store openings. The group said that like-for-like performance principally reflected a reduction in total customer transactions, partly offset by an increase in average basket values.

EBITDA (excluding exceptional items) improved marginally from £150.2m to £150.5m, benefiting from a strengthening of the gross margin and control of operating costs.

Iceland’s Chairman & Chief Executive Malcolm Walker commented: “We have achieved good progress with a range of strategic initiatives designed to differentiate our business, and stabilise our financial performance, in what remains an extremely challenging UK market place. Our ‘Power of Frozen’ marketing campaign is successfully re-emphasising our long-established credentials as the UK’s leading frozen food specialist. It is also helping to improve public perceptions of frozen food by underlining the real advantages only it can offer to consumers in quality, authenticity, freshness, choice, convenience and waste reduction as well as in providing consistently good value.”

He added: “This new marketing approach has been combined with our biggest-ever programme of product development and enhancement, bringing many new distinctive and exclusive frozen lines into our stores, including the Slimming World range which was launched in February 2015 and has already grown into the UK’s number one healthy eating brand. We have also benefited from a comprehensive upgrade and re-presentation of our fresh produce range, which has helped to build consumer confidence in the quality of our offer as a whole. The Iceland proposition has been further enhanced by improvements in our own brand packaging and in-store point of sale presentation.”

Meanwhile, the company said it would not open any new Iceland stores and would instead focus on growing its new larger ‘The Food Warehouse’ format. During the period the group opened 16 new stores in the UK (including six larger stores under The Food Warehouse fascia) and closed eleven stores, giving it net addition of five and a total of 864 (2015: 859) UK stores (including 12 Food Warehouse stores) at the year-end.

The group has already opened another four new stores under The Food Warehouse fascia since the beginning of the new financial year with an aim to open 25 new stores in total by the next year-end.

In its International business, Iceland opened two new stores in the Republic of Ireland (taking the total to 10) with the group reaffirming its plan to almost double the size of its business in the months ahead. Iceland also opened one new store in the Czech Republic (taking the total to five) and continues to supply 32 franchised stores principally in Spain, Portugal, the Channel Islands and the Isle of Man.

Iceland added that trading in the year to date showed a continued moderation of the pressure on like-for-like sales, and that it was confident of meeting its internal targets for both EBITDA and cash generation.

NAM Implications:
  • Frozen foods suppliers and retailers should share a common interest in elevating consumer perception frozen advantages – offering quality, authenticity, freshness, choice, convenience and waste reduction as well as in providing consistently good value ….
  • Scope for joint-initiatives that could increase momentum?