ASDA announces disappointing sales slide

Asda has announced another big slide in sales'‹ despite spending a further £500m on price cuts as shoppers continue to decamp to discounters Aldi and Lidl.

By The Newsroom
Thursday, 19th May 2016, 12:31 pm
Updated Thursday, 19th May 2016, 2:51 pm

Like-for-like sales fell 5.7 per cent in the 13 weeks to March 30 at a time when arch rivals Tesco, Sainsbury’s and Morrisons are reporting improving underlying sales.

The news will put further pressure on CEO Andy Clarke who is focusing on profits rather than sales. He has insisted that “every day low prices” are the best method and has criticised Bradford-based Morrisons for slashing alcohol prices before Christmas.

The 5.7 per cent fall follows a 5.8 per cent decline over Christmas, which was the Leeds-based grocer’s worst ever quarterly performance. Mr Clarke had previously described the 4.7 per cent sales crash in spring last year as the grocer’s “nadir”, but the supermarket chain has now suffered its seventh consecutive quarter of falling sales.

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Worryingly, ​Asda ​reported a 5​ per cent​ drop in the number of shoppers visiting its stores​, signalling a failure to stem the rush to Aldi and Lidl.

​Asda usually comes top out of the big four in terms of basket prices, but shoppers on a budget can get goods for around 10 per cent less at Aldi and Lidl.​

Wal-Mart, Asda’s US parent, said Asda’s price cuts were not enough to overcome the fall in shopper numbers.

Wal-Mart’s chief financial officer, Brett Biggs, said: “The UK continues to struggle, due primarily to fierce competition.

“Improvements in price and product availability throughout the quarter were not enough to overcome traffic and food volume declines in our large format stores.”

Asda said it remained focused on its revival plan, dubbed Project Renewal, which is investing a further £500m into cutting prices in a fightback against its rivals.

It ​said it is on track with moves to slash costs, having announced in January it would cut hundreds of UK jobs, largely impacting its Leeds head office, which employs 3,000 people.

Phil Dorrell, ​p​artner​ at ​Retail Remedy retail consultants​, said: “Asda for the last ​three​ years has been wallowing in declining sales, lost leadership and a Canute like approach to the threat of the discounters.

​“​If Asda was a ship it is one that is limping back to port having been torpedoed by smaller and more agile competition. Trying to maintain it’s position on price alone is simply not working, which it should have realised several quarters ago.

​“​Asda does offer a lot more than price, it just it hasn’t shouted about it in the media or in store. With sound store positions and a broad offer​, ​if unexciting and too low end, Asda has the ability to bounce back. But a blinkered price strategy won’t be the answer.​“​

​Mr Clarke pledged to show shoppers a “new Asda face” through a revamped marketing push, led by a deal with TV chef James Martin.

The partnership will see ​Mr ​Martin, who recently left the Saturday Kitchen show, provide recipes and cooking advice to families on a budget.

Mr Clarke said: “A new approach to marketing, including our partnership with James Martin, will show customers a new Asda face which showcases the values on which we have built the business over the years and reinforces our everyday low price value.”

Turnaround efforts include revamping stores and streamlining ranges​.

The big four grocers, which include market leader Tesco, number two player Sainsbury’s and number three player Morrisons, are all losing customers to German discounters Aldi and Lidl.

​Lidl ​is now Britain’s fastest growing supermarket with sales up 15.4 per​ ​cent, while sales at bigger rival Aldi rose 12.5 per​ ​cent.

Asda’s sales fall will follows a long spell of weaker trading.

“Asda are losing customers at quite a rate,” said ​​Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.

“The winds are against them. People are shopping less in bigger stores and Asda is mainly bigger stores. Their share has come down quite sharply as they used to be the number two player.

“They need to do something to stabilise and get back on track. Maybe they need to enter a new kind of channel.”

Mr. Clarke​ is expected to step down next year and hand over the reins to Roger Burnley​, who is on gardening leave after quitting Sainsbury’s. Mr Burnley is not allowed to join Asda until October.​