Sales at UK supermarket group Iceland surged more than a fifth in the six months to September as consumers rediscovered frozen food and local shops during the peak of the coronavirus pandemic.
The group said revenue was up 22 per cent to £1.7bn in the 24 weeks to September 11. The increase compares with a rise of 6.6 per cent at UK market leader Tesco for the six months to the end of August and about 3.5 per cent at Asda during the first two calendar quarters.
Analysts expect J Sainsbury to report sales growth of about 8 per cent for the 28 weeks to September 19. It is due to report on November 5.
Iceland chief executive Tarsem Dhaliwal said in a notice to the company’s bondholders that its combination of smaller Iceland stores in local communities and large Food Warehouse stores on retail parks “proved in tune with changing customer priorities”.
The company operates about 130 Food Warehouse outlets and 855 Iceland stores.
Iceland was also able to expand online delivery quickly because it picks from stores. It can now fulfil 750,000 orders a week, roughly the same as the much larger Asda chain. Its overall market share has risen to 2.4 per cent, according to Kantar data, the highest level for two decades.
Operating profit was £13.4m compared with a loss of £21m in the same period a year ago. The costs of adapting the business to Covid-19 were just over £5.8m, net of the benefit of the UK government’s business rates holiday for retailers.
Earlier this year Malcolm Walker, who founded Iceland with a single store in Shropshire 50 years ago and remains executive chairman, agreed to buy back the 60 per cent of the company held by South African investment firm Brait.
The transaction was financed by an initial £60m payment from Iceland to the Walker family holding company in June, and a second “advance” of £48.5m in September.
Sir Malcolm received a discount in return for completing the transaction earlier than envisaged. Brait has suffered heavy losses on its investments in retail conglomerate Steinhoff and in UK fashion retailer New Look.
Helped by a large increase in cash generation, Iceland also spent £40m buying back its bonds, reducing its leverage further.
The company added that sales had remained “exceptionally strong” in the third quarter to date. It cautioned, however, that the end of the Brexit transition period “poses additional challenges both to the supply of goods from the EU to the UK and to our ability to maintain supplies to our stores in Northern Ireland and the Republic of Ireland from Great Britain”.
Even though Sir Malcolm and his son, Iceland managing director Richard Walker, backed leaving the EU in the 2016 referendum, the company said that failure to agree a trade deal with the EU “would involve substantially increased costs through the imposition of tariffs that we and other retailers would have no alternative but to pass on to consumers”.
Iceland declined to comment on the results.