The Big Food Group said first half sales at its Iceland frozen food stores fell 6.7% due to aggressive pricing and shaved almost £8m off its bottom line.

To September 30 BFG posted a drop in pre-tax profit to £4.9m down from £12.8m last year on sales that also fell to £2.38bn from £2.45bn in 2001.

The group said a switch to a more traditional promotional offer had been in place since July. And that Iceland was now trading profitably, “while the excellent performance of the new stores demonstrates that we can deliver a step change in performance with this initiative”.

Chief executive Bill Grimsey said: “`The main issue facing the group today is the like-for-like sales performance of Iceland.”

“Therefore the focus is on the christmas trading period to restore sales whilst margins are maintained.”

However, BFG said at its new format stores with changes in range, store environment and services, "customers like the value based proposition and that it remains part of the roll-out strategy for the new formats”.