Big Food Group today showed a return to headline-grabbing promotions had helped improve sales at its struggling Iceland supermarket chain.
Chief executive Bill Grimsey said there had been a “significant change” in Iceland’s performance over the last three months.
Like-for-like sales were down 3.6% on a year ago in the 13 weeks to 27 December, compared with a 7.7% drop in the previous quarter.
And over a five-week period covering Christmas and New Year, like-for-like sales at the frozen food chain were down just 2.1%.
Grimsey added that margins had been maintained at “robust” levels despite the renewed emphasis on promotions.
He said: “We were able to bring the public better value and make money at the same time.”
Big Food has been battling to revive Iceland’s fortunes after a dismal 2002 in which it continued to lose market share to its larger rivals.
A decision to scrap promotions offering buy-one-get-one-free deals in favour of a longer term low-pricing policy put off shoppers.
The group went back on its decision and in the run-up to Christmas launched a TV campaign advertising promotions on over 100 items.
It said the “progressive development” of its marketing had paid off and added the performance of new format Iceland stores was also encouraging.
The group is trialling stores stocking greater amounts of fresh food and the early results showed the sales uplift was “substantial”.
Grimsey said: “This quarter has seen a significant change in Iceland sales performance and good progress with the new format store programme.
“We are pleased with the margins being achieved and the momentum across the business as profitability continues to improve.”
Big Food added, however, a slump at its cash and carry chain Booker had pushed group like-for-like sales down by 2.9% in the 13 weeks to 27 December.
Sales at the cash and carry division were down 2.8% in the quarter and by 3.5% in the five weeks to 3 January.
Shares in the Deeside-based Big Food were off 2p in morning trading at 52p.
The shares hit a low of 24p in October.
Justin Scarborough, retail analyst at West LB Panmure, said the market was concerned that like-for-like sales were still in negative territory.
He added the group’s £270m average debt level over the latter part of 2002 was also weighing down the share price.
Iceland operates around 760 stores but it is ranked ninth in the food retail sector in terms of market share – far below pacesetters Tesco.
Analysts believe Bradford-based rival Morrisons’ bid for Safeway yesterday will fuel fears of price wars in the sector.
Grimsey brushed aside such concerns and said: “Price pressure is something that happens in our industry all the time.”
Iceland now has 30 new format stores and Grimsey said he still planned to refurbish 100 sites with the concept in the next financial year.
Two months ago Big Food reported underlying first-half pre-tax profits of £6.6m, down from £17m the year before.
EGi News 10/01/03
