Malcolm Walker, the CEO of UK retail chain Iceland Foods, has reportedly made a GBP1bn bid to buy out the company he founded in 1970.

The retailer may have turned 40 this year but it has endured a rocky ride over the past decade.

In 2001, Walker was forced to stand down as chairman amid allegations of insider trading after it was found that he sold GBP13.5m in shares five weeks before Iceland released the first of a number of profit warnings. Walker was subsequently cleared of any wrongdoing and returned to the business in 2005 when Iceland, the chain, was bought by Baugur, a retail consortium based in Iceland, the nation.

However, during the credit crunch, the frozen-food retailer faced uncertainty when Baugur collapsed during the financial crisis that enveloped the north Atlantic country.

Nonetheless, Iceland has withstood the economic downturn in the UK and, according to the most recent industry data, is continuing to grow sales. Reports this weekend said that Walker and Iceland’s other management, who together own around 24% of the retailer, want to buy the remainder of the business from its other shareholders, the collapsed Icelandic banks Landsbanki and Glitnir.

So, why has Iceland, a chain positioned at the value end of the UK food retail sector, performed strongly when the likes of Aldi have seen sales slide in recent months and frozen-food sales are only enjoying low levels of growth?

According to Kantar Worldpanel data, for the 12 months ended 30 September, fresh and chilled food sales grew 17%, while frozen food grew 1%.

“Frozen food is not what is driving their growth,” says Kantar Worldpanel communications director Ed Garner. “They have a store estate that is very good in the convenience market.”

Garner believes Iceland’s growth has been driven by the group’s positioning as a convenience operator, using its high-street outlets to leverage low prices on day-to-day essentials like bread and milk to drive traffic in store.

Additionally, aggressive expansion throughout the recession, with the takeover of some 51 former Woolworths plc stores, has also broadened its store base, particularly in those high street locations, where convenience is key.

Datamonitor analyst Joseph Robinson says Iceland’s profit growth has largely been driven by the expansion. “During the last couple of years, [Walker] added 51 Woolworths outlets and another 15 stores. That space expansion has trailed off a bit this year, with plans to open 20 stores in the 2010/2011 financial year, but I think that’s been a major growth driver.”

Iceland posted a 19.4% rise in net profit before tax to GBP135m for the year to 26 March in an environment that saw fellow discounter Aldi swing to a loss of over GBP58m for the 2009 calendar year.

Analyst consensus has been that Iceland has historically performed better under Walker’s stewardship than without him. “It’s only performed better under him that it has done under Bill Grimsey, his predecessor,” Garner says.

Robinson agrees. “There’s no denying the positive impact [Walker] has had on the retailer. Since he’s come back to Iceland, he’s really focused the business, he’s not only gotten rid of non-core categories. He’s rounded the pricing, made it appear a lot more value-driven, introduced more premium ranges. He’s catering to that demand for value. It’s not only about price, it’s about getting quality for that low price as well.”

However, the road is far from clear, with consumer sentiment improving and shoppers returning to their pre-recessionary shopping habits. “Like-for-likes are [growing by] 4% and that is quite a significant slowdown, which shows that consumers are trading back up to their previous, more expensive supermarkets,” Robinson says.

For any attempted investment to pay dividends, the retailer will have to continue and expand its focus on quality and value, not just on price.