Investment Column: Big Food rating fails to account for growing risks
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Your support makes all the difference.Bill Grimsey, chief executive of Big Food Group, isn't the only person to have spotted that the cash-rich, time-poor people of Britain are spending more in their neighbourhood convenience stores. He is busy turning BFG's Iceland frozen food outlets into neighbourhood convenience stores. But he is in the esteemed company of the bosses of all the major supermarket chains, who are aggressively expanding into the same territory.
Bill Grimsey, chief executive of Big Food Group, isn't the only person to have spotted that the cash-rich, time-poor people of Britain are spending more in their neighbourhood convenience stores. He is busy turning BFG's Iceland frozen food outlets into neighbourhood convenience stores. But he is in the esteemed company of the bosses of all the major supermarket chains, who are aggressively expanding into the same territory.
No wonder that Iceland's sales were down 0.2 per cent in the first three months of this year, and that Mr Grimsey fears that the competitive landscape will get even tougher from now.
His plans to speed the pace of refits (which so far cover just a fifth of the Iceland estate) are the only serious response to the threat, but it is a costly exercise, and BFG's £250m debts make it risky, too. Analysts are cutting forecasts for the financial year just started.
Booker, the cash and carry business with which Iceland merged to form BFG, also saw its non-tobacco sales contract in the early months of this year. That was blamed on caterers buying less because of the late Easter and poor weather.
Yet here, too, the relentless march of the supermarkets could bring problems: Booker wholesales to a lot of small retailers who may be bought out or driven out of business.
We thought the risks too great when we last wrote about BFG a year ago, and have missed out on a strong rally. But now, at 135p, the shares are too highly rated to withstand the gathering threats. Sell.
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