Asda discounts 1,600 products to undercut Tesco, Sainsbury and Morrison after suffering worst quarterly sales fall on record
Asda has cut the price of 1,600 products below all rivals' levels today as it reported its biggest quarterly fall in sales on record, even worse than its rivals, during the key Christmas period.
The supermarket, which is the third biggest in the UK by market share after Tesco and Sainsbury’s, said like-for-like sales had dropped 5.8 per cent in the fourth quarter.
This marks its worst ever quarterly sales slide, with the supermarket's performance over the last three months of 2015 worse than that of Tesco, Sainsbury's and Morrisons.
- Like-for-like sales were down 5.8% in the fourth quarter
- This is the worst quarterly sales fall on record for Asda
- Today's cuts are part of a £500million investment in lowering prices
The slide in sales was announced along the price cuts as Asda tries to win over shoppers from competitors, further fuelling the raging supermarket price war.
The grocer said today’s cuts are just the first of a series of price reductions worth £500million which it announced last month that would include essentials such as fruit and vegetables, cereal, milk, meat, eggs, fish, nappies and toilet rolls.
Asda, which is owned by US retail giant Walmart, said the price cuts were aimed at making it cheaper than its rivals Tesco, Sainsbury’s and Morrisons as well as to closing the gap on German discounters Aldi and Lidl.
Chief executive Andy Clarke said: ‘The first phase of the price investment we announced in January has kicked in today with “Pocket More” to make us lowest price on a further 1,600 lines compared to Tesco, Sainsbury’s and Morrisons – and there’s more to come.
‘Through this investment we will also take another step in narrowing the price gap to the limited assortment discounters.’
But 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.'
Asda's slump in sales over the crucial Christmas and New Year period came in the face of ‘fierce competition’ in the grocery sector, which had put its market share ‘under pressure’.
The grocer said like-for-like sales - or sales at stores open for a year or more - for the whole of 2015 also fell 4.7 per cent.
Clarke said that, while 2015 had been a difficult year, results had been ‘commendably stable’ at a time when many of its competitors had suffered ‘severe falls in profitability’.
‘We have steered a careful course through this very turbulent period for the industry and through a complex set of challenge,’ he added.
Britain’s Big Four supermarkets have seen their sales and profits plummet over the past year as cash-strapped consumers have deserted them in favour of discount supermarkets such as Aldi and Lidl.
Changing shopping behaviours have also had an impact, with people increasingly preferring to shop at smaller, local convenience stores. Supermarkets have answered to the haemorrhaging of customer numbers by slashing prices.
A recent study of more than 60,000 grocery items in the UK’s four biggest supermarkets has revealed that prices fell by a record 2.8 per cent in the year to February.
Asda’s Christmas figures are the worst compared to its rivals and its market share was 16.2 per cent at the end of January – compared to 17.1 per cent a year earlier.
Morrisons, Britain’s fourth biggest supermarket, posted a 0.2 per cent rise in same-store sales for the nine weeks to January 3, while Tesco reported a 1.3 per cent rise in like-for-like sales over the six weeks to January 9.