British food retailer Iceland Group Plc warned on Wednesday it would miss its target of flat full-year sales after a sharp drop in its frozen food business over the Christmas period, pushing its shares down.
The retail chain said it would meet its profit expectations for the year to March 31, however, after its decision not to repeat the special offers it had made the previous Christmas led to higher margins and increased customer spending, which compensated for the drop in sales.
"Although the like-for-like sales are indeed disappointing, the margin improvements that we've got compensate for that, and this makes absolutely no difference to the underlying objective, which is to recover this business," Chief Executive Bill Grimsey told Reuters in a telephone interview.
Like-for-like sales at the Iceland chain slipped 4.2 percent in the six weeks to January 6, well below the growth of 1.5-3.0 percent that had been pencilled in by analysts.
That decline compares with growth of just 0.1 percent in the first nine weeks of the second half of the financial year to March 31 and a decline of 1.9 percent in the first half.
Iceland's performance contrasts with that of rival William Morrison Supermarkets Plc , which reported a 7.2 percent jump in like-for-like sales in the six weeks to January 6.
The group plans to open 80 new Iceland stores over the next three years, introducing four new shop formats to cater to local customers and refurbishing existing stores. Net debt as at December 29 stood at about 423 million pounds, down from 496 million at the end of 2000.
The company plans to change its name to The Big Food Group Plc to reflect its catering and wholesale businesses as well as its chain of budget retail shops.
Iceland remains on track to achieve cost savings of around 20 million pounds from the integration of Booker.