Malcolm Walker’s magic touch

Retail entrepreneur Malcolm Walker’s £50 million bid for embattled variety store chain Woolworths proves two things. Firstly, that he’s one of the industry’s most cheeky characters and secondly, that Iceland is doing so well that he felt able to take his eye off the ball and have a crack at what is probably retail’s most intriguing turnaround job.

While there are doubts over whether Walker and the Woolworths board will be able to agree a price for the pick’n’mix retailer, no one can dispute what Walker has achieved at Iceland. Having taken back control in arguably a worse position than Woolworths, its colourful founder has been able to nurse it back to health. Iceland is flying at the moment, says Walker. “We’re up more than 10 per cent for the year to date and, for the past few weeks, we’ve been up 15 per cent like for like on last year.”

Like the European discount grocers, Iceland has this year enjoyed a welcome lift from shoppers wanting to make their shopping budgets stretch further. But Walker is quick to point out that Iceland is performing well because the business is in good shape, not just because times are tough. “We’re getting more new customers and our existing customers are spending more, but this is because we’ve got the business right,” says Walker. “The downturn has just given us an extra boost.”

Iceland’s proof is in the frozen pudding – for the year to March 28, it delivered a 45 per cent increase in EBITDA to £130 million. “Suddenly, people are short of money and it’s very real,” says Walker. “They want value and quality and we can give them that.”

Walker has fought hard for Iceland’s success and the road hasn’t been smooth. Having left school with just an O-Level in woodwork, he joined Woolworths as a trainee manager. Eager for his own business, he began moonlighting from his day job and started selling loose frozen foods out of washing up bowls at his first Iceland store in Oswestry, Shropshire.

Woolworths soon caught wind of Walker’s sideline, especially as he had to take three days off sick for the opening of Iceland, and was fired. He never looked back and Iceland went on to float on the Stock Exchange in 1984.

The business thrived under Walker’s self-styled “chaotic management”, where board meetings were run off one side of A4 paper and the first internal telephone directory was listed under the staff’s first names. “If anyone closed their office door, they got fired,” jokes Walker.

In 2000, the retailer took over cash and carry chain Booker and then chief executive Sir Stuart Rose took the helm as Walker took a back seat. Just eight months into the role, Rose left for his dream job at Arcadia and Walker had to get in another chief executive – former Focus DIY boss Bill Grimsey.

Grimsey and his partner Bill Hoskins took over the enlarged business, renamed the Big Food Group (BFG), and Walker was forced to leave amid acrimony after a share-dealing controversy – the group issued a profit warning several weeks after Walker sold£13.5 million worth of shares.

It was three and a half years before the Serious Fraud Office cleared Walker of any wrongdoing and by that time Iceland was on its knees. The struggling BFG – comprising Iceland, Booker and Woodward Foodservice – was sold to Baugur in 2005 and the Icelandic investor asked Walker to return to Iceland. “There wasn’t one single part of the business that wasn’t broken when I came back,” says Walker.

Walker’s first task – after telling staff how dire a state the business was in – was to make 300 redundancies. As morale was at an all-time low, Walker spent £400,000 refurbishing the staff canteen and gave the head office a lick of paint. “The state of the office reflected the attitude to the business,” says Walker.

Pushing aside complicated turnaround plans, Walker’s five-year plan consisted of three words: focus, simplicity and reality. He paired down Iceland’s range, which under Grimsey had grown to include the likes of “fresh fish, pets and Barbie dolls”, cleaned up stores, stripped out the bureaucracy, ditched home shopping and pulled out of the Republic of Ireland. “We were fighting for survival and needed to chop out any non-core parts of the business,” Walker explains.

The three-pronged turnaround was a success and walking around the office, staff grin from ear to ear when talking about Walker’s return. Despite staff not having pay rises for two years, they were united behind Walker for pulling them out of the dark ages. “There’s nothing that turns a store manager on more than a sales uplift and once they all saw the business getting back to where it was supposed to be, morale lifted,” he says.

Under Walker’s steerage, Iceland has defied those critics who couldn’t see the point of a frozen food retailer anymore and grown from strength to strength, delivering returns of more than£1 billion to Baugur.

And this year is no exception. Walker, who believes frozen food is “God’s way of preserving food”, is pushing the boundaries with its range so shoppers can buy everything in their stores. Among the ready meals and chicken nuggets, you can now find frozen scallops and even langoustines.

And, while the big four grocers slug it out between themselves with various price promotions, Iceland retains its value offer. “When I came back, we were known as a buy-one-get-one-free shop and we scrapped that,” says Walker. “Three products for £1 is not a promotion – it is always that price.”

Iceland is in good shape to ride out the downturn and whether or not he manages to get his hands on Woolworths, the variety retailer’s board could certainly do worse than to take a few leaves out of Walker’s book.