With his Iceland business on a roll and a host of new opportunities on the horizon, Malcolm Walker is proving one cool trade. Peter Cripps meets him


Malcolm Walker doesn't do modest. Then again, why should he? Iceland, the frozen food retailer he founded in 1970, has this year broken the £2bn sales barrier, and with like-for-like sales up 16% and pre-tax profits soaring 84% to £113.7m, Walker is planning to open 100 new stores by the end of 2010, Iceland's biggest expansion since the hostile takeover of Bejam in 1989.

At 63, you might think it's time the retail veteran raised anchor on his Oyster yacht and sailed off into the sunset. But a life of leisure couldn't be further from Walker's mind. "I tried retiring once and I didn't like it," he says wryly, a reference to his being forced out in 2001 by his own chief executive. "Anyway, it's nice to be important."

It's hard to understate Walker's importance to Iceland. When he was brought back in by new private equity owners in 2005, the frozen specialist was just weeks away from collapse. Fast forward four years and gross margins are over 30%, and the retailer was so flush with cash it spent £4m in September flying the retailer's 800+ store managers on a trip to Florida's Disneyland for the annual conference.

The most recent TNS figures, for the 12 weeks ending 1 November, show year-on-year sales growth slowed to 6.6%, but as Walker explained, after delivering his keynote speech at The Grocer's Discounters Conference last month, the challenge of maintaining growth rates does not keep him up at night.

"We have had double-digit like-for-likes every year since I came back to the business," he says in his Yorkshire lilt. "You don't get double digit like-for-like growth forever. [But] we are still flying. The past six months have been phenomenal. It has flattened off, but we are quite relaxed."

"We have never had a five-year plan or any long-term goals. We have just grown organically. You can't look too far into the future."

So what's the secret? "I think we have had our finger on the high-street pulse and reacted as changes occurred. I can't tell you where the business is going and never have been able to. But even if it didn't grow, Iceland turns over more than £2bn in sales what's wrong with that? The business is throwing off cash. There's no pressure for growth it's not driving us. We are actually very happy with the status quo."

Not surprisingly, Walker shudders at the mention of a future flotation. Over-regulation is making it impossible to run a public company, he says, but above all he knows it wouldn't suit his "intuitive, seat-of-the-pants cowboy retailer" management style. "Most of the decisions we had to make we couldn't have made as a public company."

With the 100 new store openings bringing Iceland's store estate to 750, Walker admits Iceland may soon reach saturation point in the UK. He does, however, plan to renovate 70 to 80 stores a year for the foreseeable future, spending about £150,000 on each site.

Some of Walker's other business interests also have scope to grow. Discounter Cooltrader, which Walker founded, is on course to break through the £50m sales barrier this year. Currently boasting 47 stores, Walker hopes it will treble in size in coming years. Meanwhile, DBC Foodservice, which Walker bought in May with his MD Andrew Pritchard and FD Tarsem Dhaliwal, has boosted Iceland's buying power although, at a tenth of the size, Walker says the tie-up benefits DBC more than Iceland.

Another option is to look abroad. Previous company-run store openings in the Republic of Ireland proved unsuccessful, but Iceland now operates franchised stores in Ireland, Jersey, the Channel Islands and Spain. Walker's one reservation is that Iceland mainly appeals to English-speaking countries or ex-pat communities. It has yet to be seen if the format could work in a non-English-speaking country.

Walker admits to having some luck along the way, notably in his failure to buy Woolworths. "We made three offers, each one smaller than the last. By the time of the third offer, we leaked it to the press so they would have to talk to us. By then it was too late, and I was quite relieved we didn't get it. We were offering £50m, and they wanted £500m. Woolies was not a victim of the economy but of bad management and inflated expectations."

Harsh words, but Walker has earned the right to his strong opinions. One wholesaler boss believes if Iceland can be debt-free by early 2010 and its earnings before tax depreciation and amortisation hit £190m this year, as Walker predicts, it could borrow up to £500m for a second refinancing, leading to a massive pay-out for Walker and the other shareholders. This would also be an ideal opportunity for the management team to buy out the stakes owned by bankrupt Icelandic shareholders Baugur, Glitnir and Landsbanki.

Walker won't rule out "having a dip". "We paid out a £300m dividend two years ago through refinancing and we could do it again," he says.

For the moment, though, he is happy to focus on the short-term. With its strong focus on party food, Iceland traditionally performs well at Christmas, and having ditched Kerry Katona earlier in the year, the feelgood advertising is sure to help fill customers' trolleys. And though other retailers have aped Iceland's round-pound pricing, Walker says he has a new albeit undisclosed concept in the pipeline.

"If you could see the future, you'd be as rich as Bill Gates," Walker likes to say. Still, modesty aside, he's catching up fast.

Read more
Cooltrader on target to hit £50m mark (21 November 2009)
Walker rebuffs Brakes’ bid for DBC Foodservice (14 November 2009)

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