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MARKET COMMENT
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Carburton Street, London – Shares in Iceland Group (LSE: ICE) has failed to inspire for the eighth consecutive day. This morning, the frozen food specialist provided an update on its trading over the festive period. And it made for very grim reading. In response to the disappointing trading update, shares in Iceland tumbled another 33.5p or 13% on Friday's close, and now stand at 225p, a far cry from the 345p they reached last year. For sector watchers, the decline in Iceland's shares price should not have come as any great surprise. Those who believe that director's share dealings are a good indicator of the health of a business should take note. Only three weeks ago, Malcolm Walker, chairman of Iceland disposed of 4 million shares in his company at a price of 339p, ahead of the company's closed period. Taken in isolation, the disclosure meant very little. But the departure of Stuart Rose, the company's high profile chief executive a month earlier to Arcadia Group (LSE: AG.) should have sounded alarm bells for many investors. Today, Iceland revealed that its strategy to focus on organic products has failed to inspire shoppers. Like-for-like sales were down over Christmas and also for the latest half-year. Keen to steal a march on its rivals, Iceland misjudged and mistimed its customer's needs. In its own admission today, the company said the switch to organic was "too quick". There are also question marks that hang over Iceland's acquisition of Booker, the cash-and-carry business last summer. The move by Iceland into wholesale distribution is in direct contrast to its competitors in the grocery sector, which are all hell bent on growing market share. The purchase of Booker appears to be an unnecessary distraction for Iceland's management, which should now concentrate on what it did best, namely serving its retail customers. The company said it was conducting a thorough evaluation of the merger and it would publish its findings by the end of this month. Today's trading update lacks the detail to fully digest the implications of the company's decline in sales. But, the food retailing market is estimated at nearly £100b per annum and with only 1.9% of the market, Iceland could do a lot worse than target an increase in its market share with a bit more aggression. Where Next?
Why not have your say over on the Iceland Group discussion board?
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