Asda reveals biggest sales fall on record as competition intensifies
Supermarket Asda has recorded its biggest quarterly sales fall on record, as it slumped during the crucial Christmas trading period. The Big Four grocer saw like-for-like sales drop 5.8% in the 13 weeks to January 1, while full-year like-for-like sales were also disappointing, falling 4.7%.
The fourth-quarter sales drop was the steepest since the second quarter of last year when sales fell 4.7%. The company – owned by US retail giant Walmart – said it had faced “fierce” competition in the grocery sector, which had put its market share “under pressure”.
The trading update came as the supermarket also revealed more details about its turnaround strategy after announcing it would invest £500 million into cutting prices last month.
It said the first phase of the price cuts would come into force on Thursday through its Pocket More scheme, which aims to make Asda cheaper than Tesco, Sainsbury’s and Morrisons on 1,600 lines.
It also confirmed that it would use the investment to step up its battle against discounters like German rivals Aldi and Lidl.
Andy Clarke, president and chief executive of Asda, said that, amid the continued tough trading environment for grocers, the supermarket’s performance was “commendably stable” as some of its rivals had suffered “severe falls in profitability”.
He added: “We have steered a careful course through this very turbulent period for the industry and through a complex set of challenges.”
The sales drop for the fourth quarter was worse than analysts had expected and followed a tough period for the supermarket in the third quarter when like-for-like sales fell 4.5%.
It comes as Morrisons posted a 0.2% rise in same-stores sales for the nine weeks to January 3, while Tesco reported a 1.3% rise in like-for-like sales over the six weeks to January 9.
Sainsbury’s posted a 0.4 like-for-like sales fall in the 15 weeks to January 9, which was lower than expected.
The Big Four supermarkets have come under increased pressure from German discounters Aldi and Lidl, which have carved out a slice of the UK grocery market and sparked a supermarket price war that has seen prices fall for more than a year.
Asda announced in January it would cut hundreds of jobs across the UK in its latest move to strengthen its competitive position.
The chain said it would make cuts in the ”low hundreds” at its Leeds head office, which employs 3,000 people.
It comes after it announced a fresh 18-month overhaul in October which will see it slow store expansion in London, ease up on plans to build more stand-alone petrol stations across the UK and scale back the roll-out of its ”click and collect” scheme as it seeks to cut costs.
Shore Capital analyst Clive Black said Asda needs a more “robust and consistent proposition” than just cutting prices. He added: “If any of the superstore groups needs to be fighting the fight against the LADs (limited assortment discounters) then it has to be Asda, not least because it appears to be the current chief victim of their advance.”