Sales slump sends Big Food's shares to new low

Big Food Group reported another fall in sales at its Iceland frozen food stores yesterday though management said it had started to stabilise the business following a profits warning in July.

However, the shares fell 2p to a new all-time low of 25.5p as analysts questioned the chances of a full recovery.

"There are some encouraging points in this statement but these are outweighed by the continuing sales decline at the core Iceland chain," said David McCarthy, analyst at Schroder Salomon Smith Barney.

Another analyst said: "It is hope rather than expectation whether they can turn Iceland's performance around."

Big Food's trading update for the three months to 27 September showed that group like-for-like sales in the period were down by 1.5 per cent on the same period last year. This included a 7.7 per cent fall in underlying sales at the Iceland chain, though like-for-like sales at the Booker Cash & Carry unit were up by 0.9 per cent.

Bill Grimsey, chief executive, said Iceland's sales had not deteriorated further since July, despite a move to improve gross margins and reverse a previous decision to get rid of special price promotions in favour of every-day low prices.

Mr Grimsey added that the four new format stores being trailed had performed well, with sales uplifts averaging 14.7 per cent. Of the four different formats, only the basic frozen food store was disappointing. The company aims to open 30 more new format stores by the end of March and at least 100 over the next financial year.

He said: "I believe this should be viewed as a positive statement. I always said it was going to take two and half to three years to do a turnaround and we're only six months into that at the moment."

On the subject of rumoured buy-out interest from US venture capital groups such as Kohlberg Kravis Roberts, Mr Grimsey said: "There's no truth in any of it. I'm not aware of anything."

He admitted Iceland had lost market share in a supermarket sector where growth has been slowing.

SSSB's Mr McCarthy said: "We would like to see the company roll out the new format stores as quickly as possible in order to provide some invigoration to the sales line."

The broker rates the shares "outperform" with a 75p price target.