American owner Walmart has posted that Asda’s like-for-like sales were down 7.5% for the second quarter of 2016, significantly lower than the first quarter drop of 5.7%.
Walmart ceo Doug McMillon said the UK’s competitive environment and food deflation had been a challenge and had significantly impacted footfall in stores and comparative sales.
“Our strategy to turn things around is focused on improving the retail basics,” said McMillon.
“We are simplifying and strengthening our offering through improved availability and assortment discipline, reducing costs and driving sales through strategic price investments.
‘Turn-around will take time’
“While our turn-around will take time, I’m confident in the new leadership team there and want to assure you we’re addressing this with urgency.”
Out of the big four British supermarkets – including Tesco, Sainsbury and Morrisons – Asda is the worst performing.
The retailer blamed falling sales on significant, structural shifts driven by growth in hard discounters and intense price competition, which had led to continued food deflation across the market
Discounters Lidl and Aldi now have a 10% market share.
Walmart chief financial officer Brett Biggs said that Asda would need to go back to basics to turn its sales around.
‘Improving retail basics’
“Our strategy remains focused on improving retail basics – simplifying and strengthening the offer through improved availability and assortment discipline,” said Biggs.
“[We are] reducing costs through our cost analytics programme and driving sales through strategic price investments where we remain committed to the previously announced five-year £1.5bn price investment [Project Renewal].”
Shore Capital analyst Clive Black said Walmart’s plans will prevent further loses for Asda.
“There has been much market speculation about what Asda may or may not do to solve its trading woes with some suggestions that a form of retail Armageddon was about to strike the UK,” said Black.
“Today, we believe that Walmart dispels such a possible expectation, doing as we felt it would; that is outlining a rational plan within existing price parameters.
“We believe that this is good news for sector sentiment, particularly for the UK listed supermarket groups.”
The report comes just two months after Andy Clarke stepped down as ceo for Asda in June. He left after spending 20 years in the company, with six years in charge.
McMillon took over from Clarke after leaving a similar position as head of Walmart’s operations in China.