Asda To Avoid Price War Despite Worst Quarterly Results

Asda has said it does not plan to enter into a price war with its rivals in the UK, despite reporting its worst-ever recorded quarterly sales results.

For the three months to 30 June, the Walmart-owned banner saw like-for-like sales fall by 7.5% (excl. fuel), a sharp increase from the 5.7% drop recorded in the previous quarter.  It also marked the eighth straight month the group has seen sales decline.

The poor results were one of the few blots for parent Walmart, which itself recorded unexpectedly strong overall growth for the quarter.

Asda admitted that store traffic was down, saying it was “significantly” impacted by “fierce competition and food deflation”.

However, despite the poor showing, Walmart CFO Brett Biggs said the chain will not enter into a price war, and will instead stick to its “previously announced five-year £1.5bn price investment”.  He added the the chain remains focused on “improving retail basics, simplifying and strengthening the offer through improved availability and assortment discipline, reducing costs through our cost analytics programme and driving sales through strategic price investments”.

Sean Clarke, the new CEO at Asda, also stressed on the chain’s aim at improving the customer experience, noting: “It is prudent to take a look at the ever-changing shopping habits of today’s customers and accelerate the parts of the strategy that will make the most difference to them. We’re currently completing an intensive piece of research to understand what drives current buying decisions so that we can deliver real solutions for our customers in the Asda way. We won’t get side-tracked by the short-term fixes that are saturating the supermarket industry.”

Doug McMillon, CEO of Walmart, added: “While our turnaround will take time, I’m confident in the new leadership team there and want to assure you we’re addressing this with urgency.”

NAM Implications:
  • This looks like making every intended £1 count (i.e. not missing an opportunity to meet shopper demand via 100% availability), cutting wastage and costs, thus preserving profits…
  • …while driving sales via permanently lower prices.
  • Scope for suppliers to collaborate on both counts.
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