Iceland Profits Up Slightly In 'Challenging' UK Market

British frozen foods retailer Iceland has turned flat profits in the full-year ending 26 March 2016, as the retailer steadied its sales decline in an "extremely challenging" UK grocery sector.

Sales for the company decreased slightly, from £2.697 billion to £2.675 billion, while like-for-like sales dropped by 2.7%; an improvement from last year's 4.4%.

Despite the drop in sales, Iceland managed to increase its profits slightly, a 0.2% increase to £150.5 million, made possible by stronger margins and tighter cost control.

In a statement released by the retailer, it said: "The UK food retail market remained exceptionally challenging throughout the year due to the combination of intense competition, food price deflation and changing consumer shopping patterns.

"The “Big Four” UK food retailers have continued to be impacted by an array of competitors including limited assortment discounters, pound shops, convenience stores, more upmarket specialists and online retailers.

"Iceland has been affected by the decline in high street footfall and a reduction in smaller basket sales because of the wide range of alternative outlets now offering everyday top-up shopping lines at deeply discounted prices."

Duygu Hardman, Analyst at Verdict Retail described the full-year results as "underwhelming", as Iceland struggles against a backdrop of a decline in high street footfall and a hugely competitive market locked in a price war.

"However, its L-F-L decline has moderated thanks to an increase in average basket value, which is testament to the rightfulness of its turnaround strategy," said Hardman.

Iceland had a net addition of five stores in the last year, reaching a total of 864. According to the latest Kantar Worldpanel statistics it now holds a 2.1% market share in the UK.

"While Iceland has lost some of the momentum it gained during the recession, it has a sound programme in place to prove that its proposition is still relevant," added Hardman.