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Asda Sales Aldi

Asda posts another 3.9% sales drop two years into turnaround strategy

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By Jennifer Faull, Deputy Editor

May 19, 2015 | 4 min read

Asda has failed to recover from a disappointing start to the year as sales slipped further in the first quarter. Chief executive Andy Clarke reiterated that 2015 will be the most challenging year yet, but that it is committed to its five year turnaround strategy.

The 3.9 per cent like-for-like drop for the 15 weeks to 19 April marked the third consecutive quarter of falling sales for the retailer. The turbulent market has been fuelled by the ongoing price-war as the ailing Big Four – Morrisons, Asda, Sainsbury’s and Tesco – fight to compete with discounters such as Aldi and Lidl.

Clarke said while it “did a great job” of predicting how the market might look 18 months ago, bosses couldn’t anticipate the challenges other supermarkets would face – such as Tesco – and the lengths they would go to in a bid to get consumers through their doors.

“This last quarter has been unprecedented. 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,” he said.

“Whilst I take no pride in reporting a negative number, we are in a period of expected turbulence, not distress.”

Clarke added that investors would not see a “knee-jerk” reaction from the retailer.

“We won’t buy short term sales at the expense of long term profitability,” he declared.

Asda embarked on a five-year turnaround strategy in 2013, when it pledged to invest £1bn into lowering prices. Last year alone it spent £300m on price-cuts.

However, Kantar figures at the beginning of 2015 suggested Asda had failed to woo shoppers and shortly after the retailer announced that it would rebrand to deepen ties with parent company Walmart.

It adopted Walmart’s sunshine logo and ‘Save Money Live More’ slogan in a bid to “boost" the connection.

“Although there has been a number of opportunities for a refresh, we’ve not touched the brand since 2002 and we’ve now seen the opportunity to make changes to the way it looks,” Clarke said at the time.

£600m was further ploughed into improving the customer experience in new and existing stores.

While its grocery business has failed to benefit from such changes, Clarke revealed that George Home has noted strong sales and profit momentum while Click and Collect is up 94 per cent year on year and it operating in 611 stores.

Clarke said the strong performance would see it open the UK’s first intelligent Click and Collect pod this year.

However, consumer confidence in the economy remains a major challenge. A study Asda conducted internally found that 83 per cent of consumers are saving any discretionary income, rather than spending it.

Despite the latest Asda Income tracker showing the annual family is £16 a week better off than the same time last year, 43 per cent said they feel like they have less money now than before the 2008 recession.

“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,” concluded Clarke.

Asda Sales Aldi

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