Asda Sales Decline, But Won't Be "Knee Jerked" Into Short Term Tactics

LONDON (Alliance News) - Asda Ltd, Britain's second-biggest supermarket by market shares, said its like-for-like sales declined by 1.6% in the third quarter, but it had outperformed its UK rivals and grown market share.

Asda, owned by US retail giant Wal-Mart Stores Inc, said sales declined in the 13 weeks to September 30 by 1.6% excluding petrol, joining all its big three rivals - Tesco PLC, J Sainsbury PLC and Wm Morrison Supermarkets PLC - in reporting sliding sales.

For decades the four big UK supermarkets have dominated the UK grocery sector, however changing consumer habits have seen shoppers move away from the giant grocers and through the doors of German discounters Aldi and Lidl as well as premium retailers Waitrose and Marks and Spencer Group PLC, all of which have been snapping up market share and sales, particularly from Tesco, Morrisons and Sainsbury's.

Asda has held up relatively well compared with its rivals, according to frequent data from research firm Kantar Worldpanel.

Chief Executive Officer Andy Clarke said Asda is still outperforming its "traditional competitors" and gaining market share.

"Whilst Asda's performance in the third quarter was a step back from a 0.6% like-for-like growth in the second quarter of the year, it was noted that the retail market as a whole has slowed significantly in the third quarter," he said.

By comparison, J Sainsbury PLC posted a 2.8% decline excluding fuel in second quarter like-for-like sales for the 16 weeks to September 17. Including fuel, those sales were down 4.1%. Sainsbury's warned on Wednesday that it expects like-for-like sales to be negative for the next few years.

Tesco revealed last month that UK like-for-like sales were down 4.6% in the 26 weeks to August 23.

Morrisons said like-for-like sales were down 6.3% excluding fuel in the 13 weeks to November 2, and down 8% including fuel.

Tesco, Sainsbury's and Morrisons have all responded to the increased competition by investing in price cuts, prompting a price war in the sector, while each company is individually trying different strategies like Sainsbury's trialing an even smaller store format and Morrisons introducing a loyalty card, years after its rivals had.

Asda is widely perceived to be cheaper than its rivals, and Clarke said Asda won't be drawn into the price war or in introducing new short-term customer incentives.

"We won't be knee jerked into reacting to short term tactics. Vouchers can win quarters, but strategies win decades," said Clarke.

"A year ago we took clear action to address the changes in our market and implement a five year strategy to redefine value retailing. That is a long term strategy that won't be delivered overnight, but our early, decisive action has seen our business outperform our traditional competitors in a market that is in unprecedented distress," Clarke said.

He conceded Asda will need to do more to keep its customers from joining the queues at Aldi and Lidl.

"We have a clear understanding of the challenge we face as a business. Asda has begun to step away from the 'Big Four' and outperform its traditional competitors. We have more to do on the discounters, but we continue to close the gap on price and offer ten times the range across stores and online," he added.

By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty

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