Northern Foods slips amid sales disappointment

The maker of Fox’s biscuits and Goodfella’s pizza today suffered a shares slump after it revealed a weakening in sales growth over the summer.

Leeds-based Northern Foods, which has five outlets in Ireland employing 750 people and which is a major supplier to Marks & Spencer, said underlying sales improved by 2.9% in the 26 weeks to September 26.

While Northern said it remained on track to meet expectations for the financial year, analysts labelled the latest figures as disappointing.

Panmure Gordon stockbrokers noted that volumes were up by 4.2% in the first quarter, but this looked to have slowed to less than 1% in the most recent quarter after Northern reported growth of 2.5% for the six months.

The broker trimmed its full-year profits forecast by £1m (€1m) to £36m (€39m), compared with £39m (€42m) achieved a year earlier.

Northern shares fell 6% following the update.

Panmure highlighted “disappointing momentum” in two of the company’s three divisions, including the underlying sales growth of 3.7% in its bakery arm.

The Fox’s biscuit division has still achieved its highest brand share since 2006 after the third instalment of a television and online advertising campaign based around cartoon character Vinnie, a cross between a panda and a dog.

In frozen foods the underlying sales decline accelerated to 7.5% in the half-year, although Northern said this reflected a rebalancing of the business towards higher margin contracts. It recently surrendered several marginal own-label contracts.

In the company’s other division, chilled revenues rose by 8.8% after it introduced new discount lines in sandwiches and salads.

However, Northern warned profitability in chilled foods was being impacted by slower volumes and investment in ready meals, while new discount ranges will also impact on margins.

Northern’s sales and profits tend to be weighted towards the second half of the year, when trading is driven by businesses such as Matthew Walker Christmas puddings.

Analyst Nicolas Ceron of Numis Securities added: “The group has a history of delivering strong sales growth without profits growth. It seems that when they focus on profits they find it harder to deliver the sales growth.”