Back in May we noted that the four leading frozen food specialists had collectively been outperforming the wider supermarket sector.

Back in May we noted that the four leading frozen food specialists had collectively been outperforming the wider supermarket sector.

Retail Week Knowledge Bank had just added Frozen Value – the smallest of the four – to its coverage after it passed the £50m sales threshold following three years of elevated sales growth.

Consequently it was with particular interest that Retail Week set about updating its Frozen Value profile when 2010/11 figures appeared recently. Unfortunately, they did not live up to expectations – total sales slipped 1% at £50.5m, with operating profit falling 27%, reducing operating margin to 2.9%.

Looking in more detail, therefore, Retail Week Knowledge Bank’s profile analysis identifies two particular problem areas where underlying ratios have worsened. Despite having small shops averaging only some 2,000 sq ft, sales densities are distinctly low at just £280 per sq ft, dropping during a year when its stores number remained unchanged at 91.

Moreover, a net four units have been added this year already, so management will need them to start working hard straight away, as well as concentrating on improving productivity in an existing network that has grown by more than 20 units in five years.

Further, Frozen Value’s sales per employee are on a plateau and, indeed, below their level 10 years ago, while employment costs over that period have jumped from 11% of sales to over 15%. This ratio, particularly, seems much too high, with Heron, Iceland and Farmfoods on 11.5%, 9.7% and just 6.5% respectively. Indeed, these three also have sales densities in their notably larger units of between £415 and £620 per sq ft, far ahead of the compact Frozen Value stores.

Frozen Value remains reasonably profitable, but one cannot help wondering for how much longer and, moreover, how much more profitable it could be were these worrying ratio trends reversed and improved substantially. It ought to be possible.

  • Robert Clark, Director, Retail Week Knowledge Bank

Retail Week Knowledge Bank

Retail Week Knowledge Bank profiles the top 250 UK retailers, including company profiles and sector screening tools, and is included in your Retail Week subscription package. View the full company profile of Frozen Value.

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