Profits slide and sales flat at Asda as supermarket chain battles inflation

Asda saw its total sales (excluding fuel) rise by just 0.1% year-on-year to £20.452bn in its full year results for the period ending 31 December 2022.

And adjusted EBITDA was 24% down year-on-year to £886m from £1.2bn the previous year, with Asda explaining it had decided to invest to absorb cost price inflation and keep prices as low as possible.

But the Leeds-headquartered business reported a strong upturn in performance in H2, with like-for-like sales 5.1% up on the prior year, which it says was driven by price investments and new propositions to support customers with rising living costs.

Mohsin Issa, co-owner, said: “Asda delivered a highly resilient performance last year. We took a conscious decision to support customers by investing heavily to mitigate the impact of inflation and keep prices as low as possible.

“Although this contributed to a decline in profitability, it was the right thing to do for our customers and will ultimately help to deliver long-term growth.

“We are pleased with the strong sales growth we saw in H2, driven by investments in value and quality, and this positive momentum has continued into 2023 – with like-for-like growth of 6.8% in February.

“As well as tackling the issues of the day, we also made good progress laying the foundations to restore Asda to the number two position in UK grocery.”

Asda notes market research group, Kantar, recorded it to be the best performing traditional supermarket during the festive period, with sales up by 6.4% year-on-year in the 12 weeks to 25 December 2022.

The business notes it dropped the price of more than 100 popular branded and own-branded lines by an average of 12% and locked these until the end of the year to give customers more control over grocery budgets.

And it introduced Just Essentials, a value range of 300 products designed to keep households running on the tightest of budgets.

A new ‘Asda Express’ convenience brand has launched, targeting areas where the business has a limited presence such as residential locations and transport hubs.

And to accelerate its growth in the convenience market, Asda acquired 129 convenience stores and attached petrol stations from the Co-op for an enterprise value of £438m.

The business is working with the Competition & Markets Authority to obtain regulatory approval for this deal.

FY22 was the first full year of Asda’s ownership under the Issa brothers and private equity group TDR Capital.