Asda sales growth slows and underperforms UK rivals

LONDON, Nov 14 (Reuters) – Asda, Britain’s third largest supermarket group, said on Tuesday its underlying sales rose 2.8% year-on-year in its third quarter – a sharp slowdown from growth of 9.6% in the previous quarter and an underperformance versus its bigger rivals.

The grocer, owned by brothers Zuber and Mohsin Issa and private equity group TDR Capital, reported revenue of 5.4 billion pounds ($6.7 billion) for the three months to the end of September.

It said like-for-like food sales increased 3.2% but clothing and general merchandise sales fell 3.4% as, like other retailers, Asda was impacted by unseasonable weather across this period.

Last week, No. 2 player Sainsbury’s(SBRY.L) said its second quarter to Sept. 16 underlying sales rose 6.6%, while in October market leader Tesco (TSCO.L)reported an 8.4% rise in second quarter UK like-for-like sales.

Monthly industry data this year has also consistently shown Asda underperformrivals.

Asda also said it had repaid a 200 million pound loan facility used to acquire the Co-op’s (42TE.L) convenience stores and forecourts business last year.

“Asda has a sustainable capital structure, strong cash generation and clear strategy to deleverage over time, as the early repayment of the loan facility used to acquire the Co-op business demonstrates,” finance chief Michael Gleeson said.

Last month, Asda completed the acquisitionof the majority of petrol forecourt operator and retailer EG Group’s UK & Ireland business for an enterprise value of 2.07 billion pounds.

Asda’s strategy is to boost its convenience store presence by rolling out Asda Express stores across EG’s 356 UK sites.

EG is also owned by the Issa brothers and TDR.