Iceland has slashed its marketing budget amid ballooning losses, newly published accounts revealed this week, days after executive chairman Richard Walker announced it had canned its Christmas ad in order to invest in supporting customers.
Iceland’s headline losses widened to £17.1m in the full year to 24 March 2023, from £3.6m the previous year, after its energy costs increased by £93.3m as a result of the global surge in wholesale prices caused by the Ukraine war.
The surge meant despite sales rising 7.2% to £3.8bn, Iceland’s adjusted EBITDA, which it classes as its key performance metric, fell to £105.8m, down from £127m in 2022.
The grocer incurred further exceptional one-off costs totalling £25.3m and accrued net interest payments of £39.8m. The exceptional costs were mainly the result of restructuring costs, but included a £2.2m loss on the transaction value of the sale of its Ireland business and stores in February 2023.
“We have substantially reduced our total marketing expenditure and focused single-mindedly on the promotion of the great value we offer, frozen food and the market-leading innovation under both our own label and a growing range of exclusive brands,” Iceland said in the results.
Posting last week on X, formerly known as Twitter, Walker said Iceland had taken the “no brainer” decision to have no Christmas ad this year and instead “invest the money supporting our customers during the cost of living crisis”.
On Thursday, Iceland extended the number of products included in its £1 or less price lock for the third time this year. It added 500 new lines to the offer, taking the total number of products included to more than 1,000, and has pledged to ensure prices stay below or as close to £1 as possible until at least the end of 2023.
Iceland’s 2022 festive ad, which featured the Slade star Noddy Holder and the actor Brian Blessed, contributed to what the results called “record-breaking Christmas sales”.
Iceland’s exposure to heightened energy prices has led to concerns over its ability to pay £800m in bond debt. Earlier this year, three credit insurance providers removed cover for the business, and in August 2022 Moody’s downgraded Iceland’s credit rating.
The accounts said the supermarket had managed to negotiate supply agreements to secure 95% of its energy needs for 2024, and around 14% of its total energy needs for the next decade. It had also been working to refit its stores with solar panels and more energy-efficient fridges.
As a result of the measures, Iceland said it expected to realise savings of up to £50m on its energy costs by the end of the financial year. It had also been able to increase its free cashflow by £6.5m to £158m. Increased sales and market share left the retailer with a “strong” platform as it progressed with its current financial year.
Iceland did not provide a comment.
The retailer has been working to improve capacity across its supply chain, including by investing in its distribution centres at Swindon, Livingston and Warrington, which are managed by GXO.
Around 150 workers employed by logistics company GXO, and represented by Unite, were balloting ahead of potential industrial action, after rejecting a two-year pay offer described by the union as “below inflation”.