'Challenging year' sees Iceland suffer thaw in profits
Retailer Iceland joined its rivals in warning over the impact of food deflation and price cuts as it revealed annual earnings slumped by more than a quarter after sliding sales.
The frozen food chain, which has 859 stores across the UK, said it had suffered amid an "exceptionally challenging year" as the supermarket price war and wider deflation in the economy left underlying earnings down 26% at £150.2m in the year to March 27.
Comparable store sales dropped 4.4% over the year as it also said customer transactions fell, although new stores that were rolled out over the year saw a better performance, with the chain expanding by another 28 shops.
This helped limit the fall in total sales over the year, down 0.5% to £2.7bn.
Iceland, which employs 24,000 staff, said it had given up on trying to win the price war raging across the sector and is instead looking to boost sales by concentrating on the benefits of its offer - led by the recently launched "Power of Frozen" advertising campaign.
This helped the group see a "more encouraging" performance in underlying sales and profit towards the end of the financial year, according to the group.
Malcolm Walker, chairman and chief executive of Iceland, said: "It has become increasingly clear that concentrating on price alone no longer provides an effective point of difference in an intensely competitive and price-focused market place.
"We have therefore changed our approach to re-emphasise the quality of our products, the uniqueness of Iceland's innovation and the special advantages of frozen food, as well as our enduring commitment to great value."
Mr Walker said moves to continue Iceland's tradition of "successful reinvention" saw it roll out a nationwide online delivery service last year, as well as the launch of its new out-of-town store concept, The Food Warehouse.
It opened the first one in Stoke-on-Trent last September, offering more ranges of luxury and speciality frozen food, chilled meat and fresh produce, as well as value bulk packs of grocery products.
Six of the stores were opened by the end of March and Iceland plans to focus new openings over the year ahead on the Food Warehouse stores, double the size of traditional Iceland outlets.
It hopes to expand by up to another 20 shops overall across the UK and Ireland this financial year. Mr Walker said: "Iceland has not been immune to the pressures in its marketplace but we are strategically well positioned for the new retail environment through our focus on conveniently located neighbourhood stores, our well-established reputation for excellent value and our nationwide online shopping service."