Asda has posted an increase in revenues during its first quarter to 31 March, boosted by the spike in demand for essential groceries at the start of the coronavirus crisis. However, the group highlighted that the majority of its customers are now increasingly concerned about the price of food and are looking for value as the UK enters recession.
The supermarket chain’s like-for-like sales (excl. petrol) rose by 3.5% year-on-year. This compares to a decline of 1.3% in the previous quarter.
The number of transactions fell 3.4% during the period, although the average basket value rose 6.9% year-on-year as people did bigger shops during the lockdown.
Asda highlighted that it experienced a surge in demand for home shopping deliveries, with its website receiving more than 3,500 visits per minute during the week commencing 18 March.
The retailer also noted a significant decline in demand for non-essential items, such as fashion, fuel and general merchandise. It was required to close 33 of its Living Stores in March in response to Government guidance on non-essential retail.
However, Asda saw its smaller stores, located in local communities, perform strongly as people preferred to shop locally and avoid travel during the early weeks of lockdown.
Whilst actual figures on profitability weren’t revealed, Asda’s gross profit rate contracted in the quarter, mainly as a result of a “change in mix towards lower-margin categories in response to Covid-19″.
Since the period end, Brett Biggs, CFO of Walmart, said the Asda business had seen a significant fall in net sales, although this was mainly due to the drop in demand for petrol at its forecourts as people made fewer journeys in their cars.
Roger Burnley, CEO and President of Asda commented: “Reflecting on the last quarter – to March 31st feels a lifetime ago in the ever-changing landscape we find ourselves currently operating in.”
He added: “It has become increasingly clear that Covid-19 is set to be part of our lives for months to come and we know that customers have moved on from an initial worry about the virus, to more longer term concerns about the implications of lockdown on their family, wellbeing and finances. And, as more people return to work, they are juggling the demands of cooking more and having less time to shop for groceries. Our latest income tracker data shows that household incomes declined 0.6% in March, the first drop since 2017 and 90% of customers told us they are worried about a depression in the economy.
“Whilst safety is still a major focus for customers, three quarters tell us they are also increasingly concerned about the price of groceries and are looking for value – and we can reassure them that Asda will meet their needs on both. However long Covid-19 is with us, we will continue to offer great value to customers, as well as investing in doing the right things to protect our customers, our colleagues and our communities – and fulfil our vital role in feeding the nation.”
NAM Implications:
- Pragmatic Asda has acknowledged that spikes in demand are spikes i.e. temporary sharp increases…
- …and are now rightly focused on optimising the value-conscious consumer.
- With its increased like-for-likes and local success re closer, smaller shopping trips…
- …the idea of an Asda sell-off may have moved to Walmart’s back burner.
- But who knows, in these unprecedented times…?
