Asda has followed its rivals in reporting weak sales over the key Christmas period after shoppers reined in their spending amid the political and economic uncertainty at the end of 2019.
During its fourth-quarter to 31 December, the supermarket group posted a 1.3% decline in like-for-like sales (excl. fuel). This compares to a fall of 0.5% during the previous quarter, which the group had blamed on Brexit.
Asda stated that its recent trading had been impacted by the challenging market conditions, particularly within the clothing category. However, it described the performance of its food business as stable and highlighted that sales of its premium Extra Special ranges had climbed by 5%.
The group also revealed that profits had declined, primarily as a result of strategic price investments, discounting in clothing and a shift in mix towards lower-margin categories.
Asda’s CEO Roger Burnley commented: “We continued to improve our price position versus the previous quarter, and year-on-year, whilst our trusted combination of great value and quality ranges with a touch of Asda personality resonated strongly with customers.”
However, he highlighted that whilst customers were enthusiastic for Christmas, they were more mindful in their spending and pared-back their gift lists.
Online sales were a bright spot, with its e-commerce operation achieving double-digit growth with sales up 10.3% year-on-year. During the period, Asda rolled out a same-day delivery service to 284 stores and trialled a one hour click & collect service, which is now being extended across the chain.
The group also refreshed seven stores in the quarter and began in-store trials on a number of its sites with new partners such as Sushi Daily and Claire’s Accessories.
Looking ahead, Burnley added: “We’re ambitious to deliver even more for customers in 2020 and have entered the year with an even sharper focus on driving forward our strategy, which is anchored in saving our customers time as well as money.”
Commenting on the results, Thomas Brereton, retail analyst at GlobalData, said: “While Q4 in isolation shows Asda in a dim light – emphasised by the lack of usual detail of net sales growth, and no explicit mention of UK operations in Walmart’s earnings release – 2019 as a whole was rather encouraging for Asda, spending much of the year battling with Tesco to be the best performer of the Big Four.
“This should provide confidence in Asda’s ability as a standalone retailer as it looks to spin-off from Walmart with an IPO in 2021-22.”
Following the collapse of the Sainsbury’s deal, Walmart revealed it was considering offloading Asda via a stock market listing. However, Asda’s management has suggested this won’t take place for at least two years with it remaining focused on improving the chain’s stores and product offering.
