It is one of the questions of the moment among the UK retail trade. Will consumers turn their backs on the discount sector as and when a recovery truly takes hold?

It’s a refrain those operating in the sector will tire of hearing in coming months. After all, the likes of Lidl and Aldi were praised to the roof, as the recession took hold, for operating a smart alternative for consumers tightening their belts. The same journalists are now asking if the discount sector is a one-trick pony commanding dwindling interest.

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It’s certainly a challenge posed to Iceland Foods boss Malcolm Walker this week after he unveiled a 10.4% rise in sales in the year to 26 March, leading to a 19% hike in profits. Although he was quick to deny that the success was linked to the economic cycle, it’s hard to believe the UK frozen-food retailer’s fortunes have not been delivered a boost by this environment.

“The economic downturn has certainly helped growth in two ways: first because it has boosted the popularity and sale of frozen produce; second, because it has made consumers more value conscious, which plays into Iceland’s hands,” says Neil Saunders consulting director of Verdict Research.

That said, he goes on to back Walker’s assertion that the frozen chain was making good progress even before the downturn kicked in.

“It would be unfair to credit all of the growth just to the recession,” Saunders says. “Malcolm Walker has pursued a deliberate strategy of refocusing the business since he took over and has placed more emphasis on core competencies – simplifying Iceland’s proposition to concentrate on the niche it understands well. This will continue to pay dividends long after the recession is over.”

The mood within the Iceland camp is certainly buoyant following the successful consolidation of the of 51 former Woolworths Group stores it bought last year, which contributed to the chain’s fastest rate of expansion since acquiring Bejam in 1989.

And there is little sign of concern that any improvement in the economy will dent Iceland’s expansionist plans, which include up to 30 store openings this financial year. This total of new stores, in fact, will be the fastest rate of opening since this management team took over in 2005, apart from last year when there was the exceptional factor of the Woolworths sites.

The store openings have helped drive market share growth over recent years and there appears to be the scope to comfortably managed the levels of added space announced this week. However, beyond that, the chain may begin to reach saturation point – new space simply won’t always deliver growth. Under these circumstances, Iceland either has to continue to grow sales from existing stores, diversify or look abroad.

The upshot of Iceland’s growth, its rosy outlook and the potential need for a change in strategic direction is, inevitably, speculation about its future ownership.

“There won’t be a flotation. I’ve done that once. Neither will we work with a VC [venture capital firm]. We’ve proved by our spectacular performance that we work best when we’re left alone,” said Walker.

Walker has also been at pains to say that the Icelandic state, which owns a majority stake in the retailer since the collapse of the investor Baugur, is a silent and happy shareholder. “They leave us completely alone and it works very well,” he said.

But for how long? Iceland – the company – is a valuable asset to the Icelandic state and it’s hard not to see it wanting to cash in on that windfall at some point.

“Over the medium term I would assume they (Iceland the state) would want to sell to raise cash,” says Saunders. “That raises the prospect of who would buy. While Iceland is an attractive business it is difficult to see who may take them over.”

All the usual options have been mooted already, but one of Iceland’s larger competitors will struggle on competition grounds and there seem few other options within the retail sector that look a strong fit.

A private equity acquirer is a potential route, however, Walker, who remains a minority shareholder, has already voiced his oppostion to venture capitalists becoming invloved, and the PE sector remains fairly inactive anyway.

A more likely option, and one hinted at by the man himself this week, would be for Walker – who co-founded Iceland in 1970 – to take back control, possibly backed by a consortium.