Iceland refits stepped up after sales drop

Big Food Group is to double the pace of refurbishing its old Iceland stores in an attempt to halt an accelerating sales decline.

The company said it intends to refit six stores a week to its new format. Designed to lure today's time-pressed shoppers away from the expanding choice of upmarket convenience stores, Iceland's new stores stock ready-meals, flowers, fruit, newspapers and magazines.

Big Food Group stepped up its plans after like-for-like sales at its 750-strong Iceland estate reverted to form, falling by0.2 per cent during its fourth quarter. This masked a decline of around 2 per cent in those stores yet to receive a makeover, although sales from its 142 refurbished sites climbed by double digits.

Bill Grimsey, the chief executive, said: "Things are going to get tougher as the year goes on, now that Morrison has taken over Safeway and with Tesco in particular expanding in convenience stores. Until we get the refits done, our stores will always be vulnerable."

Despite the underlying sales falls at Iceland, which reversed growth of 1.2 per cent during its third quarter, the company said strong margins and a tight lid on costs meant it would hit the City's profit forecasts. Mr Grimsey reaffirmed his intention to bid for Londis, the convenience store group, and said the company's expansion into convenience retailing would be strengthened by a deal with it.

Yesterday's trading update revealed that the group's like-for-like sales rose by 1.4 per cent, helped by a 1.2 per cent gain at its cash-and-carry business Booker and 35 per cent growth from its Woodward Foodservice arm. But analysts expressed concern that the major supermarkets' push into the convenience store sector would starve Booker of its traditional corner shop customers. Rachel Waring, at Numis Securities, said she cut her target price for the group's shares because of concerns it would find it "increasingly difficult to grow profits without any significant progress in the top line".