Just weeks after regulators torpedoed its merger plans with Sainsbury’s, Asda has reported its first sales decline in two years, blaming the later timing of Easter and “challenging” trading conditions.
Like-for-like sales fell by 1.1% during the three months to 31 March, ending a run of seven straight quarters of growth. However, this was blamed on the Easter weekend falling three weeks later than last year with sales edging up 0.5% on an adjusted basis following a 1% rise the previous period.
Asda highlighted that it saw strong online sales, with double digit growth on its Asda and George e-commerce platforms. The group also claimed that continued price investment across its own label ranges had helped it deliver market leading sales growth in this part of its offer.
Meanwhile, Asda admitted that profits had declined in the period, with higher operating expenses partly reflecting costs associated with the failed merger plan.
Walmart’s Chief Financial Officer Brett Biggs pointed to a challenging backdrop in the UK with political and economic headwinds affecting trading conditions. But he stated that the Asda team was making progress on key strategic priorities such as improving price competitiveness and increasing own label penetration.
He added that Walmart was disappointed in the CMA’s decision to block the proposed merger of Asda with Sainsbury’s. “We’re focused on continuing to execute the strategy to strengthen Asda’s long-term success, including the potential of an IPO at some point in the future,” he said.
Earlier this week, Judith McKenna, President and CEO of Walmart’s international division, responded to recent speculation around what the future holds for Asda. She admitted that Walmart is considering a stock market listing for its UK subsidiary, although such a move could be some way off with the group saying it would maintain Asda’s current strategy and “accelerate” its price position, with it investing £80m in cuts during the rest of 2019.
Asda’s Chief Executive Roger Burnley yesterday reiterated that the business was “entirely focused” on delivering this strategy, “without the benefits the proposed merger with Sainsbury’s would have delivered.”
However, he also cautioned: “What has got us here, won’t get us where we need to go – with the rate of change accelerating, we have a tough job to do and need to go even faster, and be even more innovative in the solutions we deliver for our customers.”
