Iceland - comment

On the Q2 2026 call, management commentary was relatively positive, notwithstanding ongoing uncertainty in the UK consumer environment ahead of the upcoming budget.

Iceland recorded a 4% increase in sales, 1% from price, and the balance from volume. The Company appears to be prioritising volume at present, rising by 3%, a notable outperformance given that the overall market remains broadly flat. Gross profit margin declined by 20bps; however, the higher topline sales compensated, resulting in overall gross profit remaining flat year-on-year. Iceland continues to manage inflationary pressures effectively, including those arising from National Insurance, minimum wage increases and business rates, which together equate to approximately £55m on an annualised basis.

EBITDA was marginally lower, but improved working capital management led to a 0.2x reduction in leverage to 4.1x (3.8x on a pre-IFRS 16 basis).

The Company traded poorly over the Christmas period last year, which provides a lower comparative base for this year’s performance. In July, Iceland repurchased £10m of its 2027 bonds at 103%, and further buybacks are expected in the coming weeks.