Asda sales slump despite ‘not doing much wrong’

Britain’s third largest supermarket unveiled sales at established stores down by 4.7% in second quarter results for the three months to June 30.

UK sales were reported to have fallen in dollar terms by 5.2%, while traffic or footfall fell by 3.3% and basket size by 1.9%, revealed Asda’s US owners Wal-Mart.

Asda boss Andy Clarke claimed the retailer had reached its “nadir”,​ while acknowledging the retailer’s disappointing second quarter performance.

‘Worst storm in retail history’​

The retailer’s ceo and president Clarke, who has pledged to remain at the helm for at least the next three years said: “We continue to navigate a steady course through the worst storm in retail history, despite another challenging quarter.​

“Predicting that 2015 was going to be a volatile year, I didn’t expect to report a positive sales figure, but I’m not distracted by the short-term picture. We have an enviably stable business with balanced books and the right strategy to return us to sales growth.”​

Shore Capital analysts Clive Black and Darren Shirley commented: “Asda hasn't done much wrong in our view, but the shoppers don’t think that way.​

“We have written before that we have been somewhat surprised by the magnitude of Asda’s under-performance in 2015 and, indeed, we continue to scratch our heads on this matter given the magnitude of sales weakness recorded today​ [August 18]; we cannot remember such weak same-store sales from the group in recent times.”​

‘Genuinely innovative in the online space’​

Asda was “executing reasonably well”,​ with store standards, availability and service counters, said the analysts. “The business has a pretty robust price value quotient and it has been investing in the still growing online grocery channel. Indeed, Asda has been genuinely innovative in the online space.” ​

But the competitive dynamics of the grocery sector were working against Asda’s favour. The limited assortment discounters were continuing to take share, both through like-for-like sales and particularly new stores, and Asda faced sharp competition from superstore competitors Tesco and Morrisons, while Sainsbury remained “a dogged competitor”.​

Nevertheless, with management continuing to focus on a simple and straightforward business, with lower costs, fewer gimmicks and a more accessible “arguably honest”​, approach to grocery retailing, Asda was “most certainly is not going away!”​, concluded Shore Capital.

Shore Capital retained its neutral stance on the stock of UK supermarkets.

Meanwhile, supermarket rival Sainsbury recently overtook Asda for the title of Britain’s second largest supermarket after Tesco, according to Kantar figure.