Iceland EBITDA impacted by supply chain problems
In the 53 weeks to 30 March, adjusted EBITDA excluding exceptional items was £157.1 million compared to £160 million in the previous year. Iceland said the decline was due to investment in price cuts and problems in its supply chain in December which caused poor overall availability over the key Christmas trading period.
After a strong start to the year with 6.4% like-for-like growth in the first quarter, core growth slowed through the second quarter to 2.2% and to 0.3% in the third quarter. However, like-for-like growth recovered to 1.8% in the fourth quarter after Iceland repositioned its marketing and in-store point of sale to focus more on the value offering for customers. Sales in the fourth quarter also benefited from the earlier date of Easter this year.
During the period Iceland opened 27 new stores in the UK including 23 larger stores under The Food Warehouse fascia. It also closed six stores to give a total 904 stores at the year end.
Iceland Foods managing director Tarsem Dhaliwal said: “This year we have continued to take a longterm view and to invest for the future: expanding our store footprint, enhancing the appeal of our existing stores through a major programme of refurbishments, growing our award-winning online business, continuing to roll out new and exciting food lines that are unique to Iceland, and developing our supply chain to support the growth of our retail estate.”
Iceland said group sales are continuing to grow in the current year driven by its expanding store estate, but that like-for-like sales are so far negative against the very strong comparative of 6.4% growth in the first quarter of last year.
The company currently expects group EBITDA in the first and second quarters to be lower than in the prior year as it faces increased staffing costs driven by the National Living Wage, the effect of rising oil prices on consumers’ disposable income and distribution costs, and the timing of its marketing expenditure.
It added: “The third quarter gives us strong scope for profit recovery, due to the timing of investment and the poor performance in the previous year.”
Looking ahead, Iceland said: “We believe that we must focus on running our own business rather than allowing ourselves to be diverted by external issues over which we can exert no control, whether those be Brexit or the proposed merger of Sainsbury’s and Asda.”
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