Big Food shares trashed after botched promotions

Shares in Big Food Group plunged 59 per cent yesterday when the retailer said its Iceland supermarkets business would record a first-half loss after a botched move to cut the level of price promotions pushed customers elsewhere. The shares shed 54.25p to just 38.25p, their lowest level for more than a decade.

Bill Grimsey, chief executive, said the company would now restore the "buy one, get one free" offers which were withdrawn as part of the company's new strategy to move to an "everyday low prices" approach. "Our customers have depended on the buy one, get one free promotion for a number of years. The pace of that change has been too fast for our customers," he said.

The announcement shocked the City as it came just 15 days after the Big Food Group gave a trading update that included no mention of any problems with the current pricing policy. The group also held its annual shareholders' meeting last week and said nothing about current trading.

In a "sell" note entitled "Into Room 101 it Goes" Andrew Fowler, food retail analyst at Merrill Lynch, said: "It is difficult to believe that the last 15 days' trading has cost this business £1m of profit a day. Iceland's financial reporting systems have been found wanting before but we thought the new team had improved them."

Big Food Group, which changed its name from Iceland this year, was criticised by the Financial Services Authority for failing to give timely information to the market after a dramatic profits warning 18 months ago.

Mr Grimsey said yesterday that he had issued a statement as soon as the information was available. "We only received the information on our phased forecasts on Wednesday night. As soon as the information hit my desk I've had it published. I've acted properly. No one knows better than I do my obligations as chief executive." He added: "We've got a blip. I'm not trying to hide that."

In the three weeks since 28 June like-for-like sales in the Iceland stores were down 8.3 per cent on the period last year as shoppers went elsewhere in search of a bargain. The company has since reinstated special offers but these have cut margins.

The Iceland chain is now forecast to make an £8m loss in the first half against a previous estimate of a £6m profit. The Booker cash & carry chain has remained relatively stable. Merrill Lynch has cut its group full-year profit forecast from £46.5m to £25m.

Mr Grimsey, who joined the group 18 months ago, said: "I've learned yet again that this business is fragile."

Asked whether he regretted taking the job he said: "I am where I am. It's a huge job."

The company is also facing the threat of legal action from nearly 1,000 staff over its decision to close its final salary pension scheme for both new and existing members.