Malcolm Walker has more business lives than a cat. He built his frozen food empire Iceland from a humble shop in Shropshire in 1970 into a £2bn turnover business 30 years later, before hitting a financial iceberg.
Walker was forced to step down as chairman in 2001 after the Financial Services Authority launched an investigation into his sale of £13.5m shares just weeks before the group issued a profit warning. In 2005, after being cleared of wrongdoing, he made his prodigal return to his beloved Iceland and brought it back to growth.
Now, two years on from his £1.5bn management buyout of the business – and less than a year after a £950m refinancing – Iceland looks to be in troubled waters again.
The retailer revealed yesterday that like-for-like sales fell by 4.4 per cent in the year to 27 March. Earnings excluding tax, interest and one-off items fell to £150m from £200m last time.
“It’s a perfect storm,” Walker told City A.M. “Sales are under pressure, margins are under pressure, there’s deflation in the market and all this happened at once.”
He also added that the supermarket price wars have driven down prices to the point where they were no longer a differentiator, with retailers now having to bring other strengths and qualities to the fore. For Iceland, Walker argues it is not only its frozen food, which makes up half of the business, but also its provenance.
“We have gone as far as we can on price and now our focus is on quality,” he said, adding that this at the centre of its recent TV advertising campaign.
As well as overhauling its marketing, it has also invested in improving its home delivery service and opening 28 new stores including six under a new and larger “Food Warehouse” concept.
Data from Kantar Worldpanel shows Iceland recorded a 1.9 per cent rise in sales in the 12 weeks to 24 May with a market share of 2.1 per cent. However Kantar’s Fraser McKevitt said, like the big four food retailers, it had not been immune to the rise of the discounters: “There is a particularly unique case for Iceland because in many ways they are competing for the same shoppers [as Aldi and Lidl],” he told City A.M.
But Walker insists the current turmoil in the market is nothing he hasn’t seen before. “We have seen been through many cycles and this is just another one… It’s time to fight back,” he said.