3Q15/16: Upside on margins led to decent results

​UK-based food retailer ICELAND FOODS has published its 3Q15/16 results ended January 1st, 2016, which were again slightly better than what we have expected in terms of EBITDA (£47m vs. SRe of £45m). The UK market remains challenging for food retailers, impacted by intense competition, food deflation (-1.8% in Q3) and the rise of discounters (Aldi and Lidl). The group tends to underperform its major competitors on the ambient and chilled product categories. However, the marketing focus is on frozen food (c. 37% of total sales), which outperforms other categories. In Q3, Iceland’s sales declined by 3.1% yoy on a LFL basis to £864m (vs. SRe of £878m), mainly due to fewer customer transactions (especially for customer baskets of less than £5). The LFL sales growth worsened sequentially (Q1: -2.9%; Q2: -2.0%) due to a very weak trading over the 6-week period, from the end of October to midDecember 2015, and could not be entirely offset by the satisfactory sales during the Christmas period. Including new store openings, reported sales decreased by 1.5% in Q3 (9M: -0.8%).