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Asda’s LFL sales tumble 4.7% but chief exec confident of better times ahead

| International retailers

Asda has revealed yet another slump in quarterly sales performance, highlighting its struggles in the face of the onslaught from the discounters and changing shopper trends.

 

With its traditional rivals cutting prices to compete with Aldi and Lidl, Asda felt the full effect of the ongoing price war with its like-for-like tumbling 4.7% in its second quarter (11 weeks to 30 June). The poor result follows on from a 3.9% fall in its first quarter and further cements the chain’s position as the worst performer amongst the big four supermarket multiples.

However, the chain’s under-pressure Chief Executive Andy Clarke remained upbeat saying the group was continuing to “navigate a steady course through the worst storm in retail history”, describing the sales fall as a low point that the group will recover from in the months ahead. He said: “The market is in exceptionally challenging times. We have certainly hit our nadir. Every business has got to have one and this is ours”. He added that the chain was now on an upward trend and it was seeing “positive green shoots” in its current trading.

He said that his strategy of cutting prices while eschewing the money-off vouchers used by its rivals had the full backing of its parent group Walmart and any rumours that he was under pressure to leave were wrong. “The strategy is working and we are wholly committed as our parents are to seeing it through no matter what the short term disruption might be around us,” Clarke said, adding: "I'm here to stay."

Walmart does not break out profits for its British operation, but Asda’s Chief Financial Officer Alex Russo hinted that profits were holding up compared to declines at other supermarkets. "Behind the negative sales number lies a more positive story for Asda," he said. “We are maintaining balance in an impulsive market and performing solidly in growth channels, maximising and accelerating our areas of strength while addressing areas of underperformance.”

Shore Capital analyst Clive Black described the sales performance as disappointing, but added: "They haven’t participated in some of the gimmicks and promotions and coupons that others have engaged in, and that’s been to the detriment of the top line, but it means that they’ve got potentially a more robust underlying position than may first suggest."

Whilst Asda was the first of the major supermarkets to fight back against the discounters with price cuts last year, its trading has weakened in recent months after rivals launched their own price-cutting campaigns. Tesco and Morrisons have also been invested heavily in improving their product ranges and customer service to tempt shoppers back to their stores. Recent market share data from Kantar Worldpanel showed that that Sainsbury’s had overtaken Asda as the nation’s second largest supermarket for the first time since January.

 

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