Iceland’s profits have all but stalled as the frozen food retailer grapples with the effects of a fierce supermarket price war and soaring operating costs.
The frozen food specialist posted a modest 0.6% increase in underlying profits to £317.6m in the year to the end of March, a sharp slowdown from the 24% rise the previous year.
Revenues were flat at £4.2bn, though Iceland noted that its 2024 financial year had included an extra trading week. Adjusting for this, sales were up 3%.
According to the Telegraph, the slowdown comes as Iceland steps up efforts to offer value to shoppers, who remain highly price-sensitive amid the ongoing cost-of-living squeeze.
Like rivals, the retailer has leaned on aggressive price promotions, including multibuy deals, to fend off competition from the likes of Aldi, Lidl and Asda.
While the number of items sold rose 5.3%, the total value of sales remained unchanged – underlining the pressure on margins.
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Earlier this year, Asda sparked a new round of supermarket price cutting, with chairman Allan Leighton vowing to use a “war chest” to lower prices and overhaul stores, even at the expense of profits.
Tesco followed suit, warning its profits could fall by up to 14% as it invests £400m in price cuts.
In this climate, Fitch Ratings said shoppers continued to seek out Iceland for value “despite heightened competition”, with the retailer maintaining a stable market share of around 2.3% to 2.4% over the past five years.
However, Fitch raised concerns about Iceland’s profitability, forecasting potential pressure on margins this year.
“The company, along with other UK-based retailers, will be hit by the rise in National Insurance and minimum living wage contributions from [this year], which we estimate will result in an additional cost of £50m,” it said.
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