Underlying sales at Iceland have fallen by 7.7 per cent in the three months to the end of September.

This disappointment follows a profit warning in July, caused by shares in parent company the Big Food Group (BFG) slipping to an all-time low of 25 and a half pence.

Bill Grimsey, BFG chief executive for 18 months, said his task recently has been to stabilise the gross margin by returning to promotional activities and away from the wider 'value' proposition.

Strong performances, however, have been noted at the four Iceland stores that have been given a new format, sales in these shops rose by almost 15 per cent in the second quarter.

BFG expects around 30 of its 759 stores to change to the new format by the end of the financial year.

Grimsey said: 'We are still in trial terms. I won't press the button on the roll-out programme until I'm comfortable we've understood every element of the format.' It is not just Iceland which is suffering in the food retailing environment.

The UK's number one supermarket Tesco has also reported a drop in like-for-like sales growth of one per cent.

Grimsey concluded: 'I've got talented people around me. I'm very confident that we will see out way out of it. I will deliver. I have no intention of leaving. I am a person of principle and I have an obligation to my shareholders to stay.'