Asda’s “blinkered price strategy” is holding it back say retail analysts

ASDA delivered another poor performance yesterday with like-for-like sales down 5.7%, but will it face an uphill struggle back to the top or is the supermarket fighting a losing battle?

Analysts have said that such a steep decline will begin to impinge on profitability at Asda, and its performance is conspicious in the wider Wal-Mart international division, in which results were more robust.

Clive Black head of research at Shore Capital said: “From where Asda was two years ago this is a surprise outcome, but the group is now firmly the meat in the sandwich between ‎the price-centric discounters and recovering superstore competitors.

“Turning Asda around will not be quick nor easy albeit management is on the case; in essence Asda needs to re-find its mojo, its positive retail gene and flog a lot more a lot better.”

Whilst rivals including Morrisons improving performance, Asda has proved to have more cumbersome and less flexible plans, even under chief executive Andy Clarke’s Project Renewal. Mr Clarke himself, analysts pointed out is the longest serving chief executive in the Big Four, and has also overseen the biggest drop in Asda Walmart’s sales history.

However, Phil Dorrell, partner at consultants Retail Remedy said Asda’s “Canute-like approach” to dealing with discounters had damaged its ability to catch up. Mr Dorrell also said: “He at least seems confident that he is not going anywhere and will be judged to be either tenacious or deluded.”

Mr Dorrell said: “If Asda was a ship it is one that is limping back to port having been torpedoed by smaller and more agile competition. Trying to maintain it’s position on price alone is simply not working, which it should have realised several quarters ago.

“Asda does offer a lot more than price, it just it hasn’t shouted about it in the media or in store.

“Asda has the ability to bounce back. But a blinkered price strategy won’t be the answer.
Asda has some great sites, still some of the busiest grocery retail spaces in the UK; It has plenty to work with, yet it has much to do to re-emerge as the sum of its parts.”