Asda “on right track” but sales still falling

Asda’s American owners believe the supermarket is now “on the right track” despite an 11th-consecutive quarter of falling sales.

The Leeds-headquartered business saw like-for-like sales fall 2.8% in the three months to March 31, compared with a 5.7% fall in the first quarter last year.

Sean Clarke was appointed as chief executive of Asda last June, joining from Walmart China, as the supermarket group sought to improve its fortunes after like-for-like sales slumped by 7.5%. Since then Asda has lessened the sales decline each quarter, albeit this time by one-tenth of a percentage point.

Clarke said that “despite this progress we are in no way complacent”.

He added: “We’re pleased that the momentum of Q4 has continued into the New Year with a third consecutive quarter of improvement.

“We’re delivering more consistently for our customers, particularly in fresh food, service and availability – both in stores and online.”

Walmart updated the New York Stock Exchange and were more upbeat than previously about the direction the UK business is headed. Chief executive’s Doug McMillon said: “We’ve made some progress in the UK and the team is executing their plan. We are navigating our way back to a position of strength in that highly competitive market.”

Brett Biggs, Walmart’s chief financial officer, added “we’re confident we’re on the right track” in the UK, pointing to improvements in its underlying performance.

Analyst Phil Dorrell, partner at Retail Remedy, said: “After spending 11 consecutive quarters in decline new leadership at Asda was always going to struggle turning the tanker. The consolation is that successive comparisons get easier, as the pressure from Bentonville mounts.

“Recent visits to Asda suggest that availability is making progress but it is only as good as the range. Chasing costs for too long has meant the quality has become diluted.”

Industry figures from analysts Kantar published this month showed Asda had stopped its year-on-year sales decline after nearly three years, but it continued to lose market share. Kantar’s figures show Asda had 15.6% of the UK grocery market, having been at 17% two years ago. Earlier this year, Walmart’s management said it was addressing the problems at Asda “with urgency”.

While Dorrell is optimistic about Asda’s longer-term prospects, he warned it will be a slow process that will require an innovative response.

He addd: “We are positive that change will happen at Asda but the erosion of quality through cost reduction and price engineering takes some reversing out of. Nothing we have seen so far however suggests this is even currently on the agenda.

“The discounters stole Asda’s ball and now they need to invent a new game. With their space and category range Asda could do something few others can. The problem is that whilst they struggled to decide what they were, everybody else just got better and stole their share.”