Iceland's full-year profits fall thanks to price cuts and supply chain problems

Merger between Asda and Sainsbury's could present opportunity to buy more stores, Iceland says

Iceland is offering the deal as a 'special Christmas thank you' (PA)

Iceland’s full-year profits fell thanks to price cuts and problems with its supply chain in the crucial Christmas period.

The supermarket’s profits dipped 1.8 per cent to £157.1m in the year to 31 March as sales grew 8 per cent to £3bn.

Iceland opened 27 new stores in the UK, including 23 stores under The Food Warehouse brand, taking it to a total of 905. Like-for-like sales were up 2.3 per cent.

Food Warehouse stores are roughly three times the size of Iceland’s traditional branches and are mostly located in retail parks.

The company said it would not be diverted by external issues over which it has no control like Brexit but added that “clarity on the nature and timing of Brexit would be helpful to us as it would to every other business in the UK”.

The proposed merger of Asda and Sainsbury’s “seems unlikely to add materially to the intense competitive pressure under which we already operate,” the company said.

The deal could even present an opportunity to purchase new stores if Asda and Sainsbury’s are forced to offload some outlets by the competition regulator, Iceland said.

Iceland became the first major retailer to promise to remove plastic from its own-label products and the first UK supermarket to remove palm oil.

“Although our motivation in acting on plastics and palm oil is not primarily commercial, we believe that the positions we have taken can only enhance our appeal to consumers, and hence our sales, in the longer term,” Iceland group managing director Tarsem Dhaliwal said.