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Iceland reveals gloomy short-term outlook

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Iceland has warned that earnings for the first half of this year will be lower than the previous year, due to a slowing grocery market and other factors.

While overall sales grew by 8% to £3.016bn in the 53 weeks ending 30 March, like-for-like sales in the year to date are negative.

In an update, the supermarket chain said that the market had slowed and it expected core earnings to fall “as a result of sales performance, increased staffing costs driven by the rise of the national living wage, the effect of rising oil prices on both consumers’ disposable income and distribution costs, and the timing of our marketing expenditure”.
The third quarter was seen as giving “strong scope for profit recovery”, however.
Regarding staffing costs, the chain said it “fully support(s)” the introduction of the national living wage.
But it added the government’s intention to increase it to £9 per hour by 2020 would “impose substantial additional costs” in a “savagely competitive trading climate”.
It added: “We believe that we must focus on running our own business rather than allowing ourselves to be diverted by external issues over which we can exert no control, whether those be Brexit or the proposed merger of Sainsbury’s and Asda.
“Clarity on the nature and timing of Brexit would be helpful to us as to every other business in the UK, but we are confident of our ability to trade successfully through any likely future scenario.”

Iceland has 905 stores in the UK.
Meanwhile, Tesco announced underlying growth of 1.8% on Friday, its strongest performance since 2011.
Tesco, which has a 27.7% market share of the British supermarket sector, said its success was due to a drive for lower prices.
Chief executive Dave Lewis said: “Our growth plans are on track and we are pleased with the momentum in the business.
“We remain well-placed to serve our customers better and deliver on our medium-term financial ambitions.”

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Tesco recently bought wholesaler Booker for £3.7bn to expand into supplying cafes, shops and restaurants.
But Sainsbury’s later countered with an offer to buy Asda, a deal that would move Tesco to second place in the market share stakes.

Source: SKY