Big Food Group beats forecasts despite sales decline

Related tags Big food group Fiscal year Iceland

A poor first half performance from the Iceland fascia pushed down
sales and profits at the Big Food Group in 2002. But it also masked
the improvements made in the second half of the year which gave the
company a solid base on which to drive sales in 2003.

The Big Food Group​, the UK-based retail operator which owns the Iceland and Booker chains, has reported results which were better than expected despite coming in at a level lower than the previous year.

Turnover for the year was down to £5.06 billion (€7bn) from £5.2 billion in 2002/02, while pre-tax profits were also lower than the year earlier, dropping from £42.9 million to £37.1 million.

But the full year results were overwhelmingly affected by a poor first half performance from the Iceland chain, and while strong growth in the second half was not sufficient to offset this decline, it was certainly enough to suggest that the worst may be over and that the company can expect to see real gains in the current fiscal year.

Like-for-like sales for the year were down 2 per cent overall, with Iceland stores alone seeing a decline of 4.3 per cent. The company said that the poor first half from Iceland was due to an aggressive move towards lower prices in a bid to increase sales, but the re-establishment of the group's traditional promotion-led offering in July helped restore margins in the second half.

But what was most encouraging was the performance of the 33 refitted Iceland stores, with stores under three of the four different formats being trialled showing like-for-like sales up by 14 per cent during the year. A further 100 stores are set to be refitted during the coming year, with an extended product range and a more 'customer-friendly' design.

There was also an improvement in the fortunes of the Iceland home shopping business, helped by the launch of a new website and CD ROM ordering service. The company has also changed to the store pick method (whereby Internet orders are fulfilled from stores rather than distribution centres) so successfully used by market leader Tesco, as this was found to be more economical. As more stores are refitted and their product ranges expanded, Internet shoppers will also be able to benefit from a wider portfolio of products, the company said.

While the Iceland arm appears to be on the road to recovery, the Booker wholesale business continues to go from strength to strength, lifting food sales over the year. However, there were declines in tobacco and phone card sales. The Woodward Foodservice arm also showed good growth during the year.

"The year 2002/03 saw a decline in market growth for the food retail sector as well as an increased level of corporate activity. Both of these issues point to ever increasing levels of competition in the supermarket and convenience store segments served by Booker and Iceland,"​ said Bill Grimsey, Big Food Group's chief executive.

"Despite this more challenging industry background, we enter the new financial year confident that a solid base for the longer term growth of the business has been established. We are investing in our brands and products to meet the changing needs of today's customers.

"Reinvigorating what Iceland has to offer will enable us to maximise the potential of our 754 stores. Booker is evolving to enable it to capture more of the higher-growth independent catering market while building on its leading market position within the independent retail sector. Woodward is well placed to continue its rapid development, although revenue investment to achieve this will continue to constrain performance in the short term."

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