Iceland feels heat from supermarket pricing wars

Iceland has warned over the impact of food deflation and price cuts after annual profits turned cool.

Iceland is facing challenging times amid the price wars. Picture: PA

The frozen food chain said yesterday it had suffered amid an “exceptionally challenging year” as the supermarket price battle and wider deflation in the economy left underlying earnings down 26 per cent at £150.2 million in the 12 months to 27 March.

Comparable store sales dropped 4.4 per cent over the period as it also said customer transactions fell, although new stores that were rolled out over the year enjoyed a better performance, with the chain expanding by a further 28 outlets.

This helped limit the fall in total sales over the year, down 0.5 per cent to £2.7 billion.

Iceland, which has 859 stores across the UK and employs some 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.

Boss Malcolm Walker 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.”