Asda has revealed a 3.9% fall in like-for-like sales during an “unprecedented” quarter in the grocery market. It is the third straight quarter of decline for the Big Four supermarket, widening from a 2.6% drop in the final quarter of the previous financial year.
CEO Andy Clarke blamed the disappointing performance in the 15 weeks to 19 April on the brutal price war with its competitors and customers saving their new-found disposable income for a “rainy day”. He described 2015 as the “most challenging year yet” for UK supermarkets.
Speaking at an event in London this morning, Clarke reaffirmed his commitment to Asda’s five-year strategy and vowed to avoid a knee-jerk reaction at the expense of long-term profitability.
“This last quarter has been unprecedented,” Clarke added. “We have seen deflation in the market and exponential shifts in the industry. Although I still believe that 18 months ago we did a great job of predicting changes, we could not have foreseen what’s happened to others and the moves they have had to make in order to restore their business – creating an impact on us in the short-term.”
Asda ploughed £300m into cutting prices in 2014 as part of its strategy to ‘reiterate’ value and is also spending another £600m improving its stores. However, the latest figures from Kantar Worldpanel showed Asda to be the worst performer out of the Big Four supermarkets in the 12 weeks to 26 April 2015. The company saw sales slide 2.2% compared with the previous year, with Morrisons more than 1% better off with its till roll down 1.1%, Tesco falling 1% and Sainsbury’s down 0.2%.
Clarke said he took “no pride” in reporting a negative sales number, but emphasised it was experiencing a period of expected turbulence, not distress.
“We won’t buy short-term sales at the expense of long-term profitability. Throughout this period of change in our sector, Asda has been first to market with its response,” he added.
“Fundamentally, Asda remains a balanced, healthy sustainable business with a clear direction allowing us to hold our nerve and remain focused on delivering for our customers.”
Asda reported a 380 basis point increase in George Home operating margin, with “strong sales and profit momentum”. It also said there had been a 94% rise in click-and-collect sites to 611 compared with a year ago.
“Despite signs of a real and sustainable economic recovery, 2015 is setting itself up to be the most challenging year yet for traditional supermarkets,” Clarke added. “Customers are not yet cash-confident, preferring to save rather than spend and, as expected, the market remains turbulent.
“Despite all this we remain a financially strong and balanced business, one which was first to market with our strategy. I’m fully committed to delivering long-term growth at Asda and focussing on giving customers what they want.”
Asda owner Walmart also reported a 0.1% dip in revenue to $114.9bn and a 8.3% fall in operating income to $5.7bn in the first quarter.