Iceland - comment

Some worrying headlines out from B&M this morning, stating sales in Q2 were down 2.2% versus last year and in their UK core store base, the revenue decline was 9.1%. However, this includes a comparatively strong April 202, and when excluded, overall sales were down only 1.6% (for the last 8 weeks of the quarter). The other point, which isn’t made on the release is the cannibalising nature of the store rollout on LFL comparisons. B&M increased its store numbers in the UK by 21, up to 705 at the end of the quarter.

No doubt the headlines are bad and when combined with the numerous stories on UK food inflation, the outlook for the UK consumer is poor. However, it should be noted that retailers are by and large passing on the price increases to consumers, and that "Shoppers are now more likely to cut down on out-of-home consumption, shop to a fixed budget, switch to cheaper private label and seek out retailers where prices are the lowest,” according to the BRC. This is reiterated by B&M not changing their FY23 (March 23) guidance issued last month.

We are revisiting our Iceland model prior to the release of their FY22 (March 22) numbers on the 19th July.