Asda posts worst annual figures since Walmart takeover

Supermarket is worst performer of ‘big four’ grocers as fierce competition pulls underlying sales for the year down 5.7%


Asda has posted its worst annual figures since being taken over by the American grocer Walmart, as fierce competition in the UK supermarket sector took its toll.
Britain’s third biggest supermarket chain admitted performance was “behind expectations” after pre-tax profit for 2016 fell 19% to £791.7m.
Accounts filed at Companies House also showed sales fell to £21.6bn from £22.3bn as shoppers flocked to cheaper rivals.
Asda has trailed behind Tesco, Sainsbury’s and Morrisons, and is the worst performer of the UK’s “big four” grocers. The former chief executive Andy Clarke was replaced by the Walmart veteran Sean Clarke, who has attempted to breathe new life into the business. He took the helm last summer. He has focused on dropping prices, boosting the quality of food ranges and improving customer service.
While underlying sales for the year plunged 5.7%, Asda pointed to a recent improvement in trading. The latest industry figures showed Asda attracted an additional 398,000 shoppers in the 12 weeks to 16 July. The Kantar data showed Asda’s sales for the period grew by 1% compared with the same period last year.
In May, the grocer also reported sales in the first quarter had fallen 2.8% compared with the same period the previous year – an improvement on the 2.9% fall in the fourth quarter. Second-quarter figures are expected this month.
The accounts also showed Andy Clarke and the former chief customer officer Barry Williams, who has also left the business, received a combined £2.5m payoff. The firm did not break down the share of this sum.
Sean Clarke and the former Sainsbury’s executive Roger Burnley, who started as chief operations officer recently, have focused their turnaround efforts on the retail basics.
The finance director, Alex Russo, said: “Our sales performance, relative to the market, was behind our expectations. However, in the last quarter of 2016, we saw an improvement following the changes made to our ranges and investment in price and service.”
Asda also reported an operating cashflow of £1.41bn, an increase of 8%, and said a dividend of £450m was paid to Walmart.
All the “big four” grocers have suffered in recent years from seismic changes to the industry. Consumers have swapped their weekly shop for more frequent visits to smaller convenience stores as they seek to cut down on food waste at home. There has also been a shift away from bricks and mortar stores as some prefer buying online.
While shoppers can buy Asda food over the internet, the supermarket has been hit harder than most because it refuses to join rivals in opening smaller stores.
The “big four” have also come under attack from discounters Aldi and Lidl, which can undercut their bigger rivals by stocking fewer high-quality ranges. They are able to negotiate rock-bottom prices by buying entire crops from farmers while bigger supermarkets buy smaller quantities from a larger number of suppliers so they can offer more choice.
Asda again has been affected more than the others because its biggest point of difference was price, something that has been cannibalised in recent years with the low-cost operators. Asda has been too slow in responding to that competition, at a time when its arch rival Tesco has managed to turn its business around.
Tom Berry, retail analyst at GlobalData, said: “Asda has chosen to focus on price rather than range and in-store experience, which has clearly been the wrong strategy.”
Notes in Asda’s accounts showed it was focusing on cutting costs: “Our commitment to the ASDA ‘low cost operating model’ has resulted in improving operating efficiencies and delivering productivity savings across stores and distribution centres.”

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Posted on August 3, 2017, in #retail, #uk, Other. Bookmark the permalink. Leave a comment.

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