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| Asda rejects price war after eighth quarter of decline Asda rejects price war after eighth quarter of decline | |
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| Asda has said it will not be increasing its investment in a price cuts regime despite a further 7.5% slump in sales in the spring. | Asda has said it will not be increasing its investment in a price cuts regime despite a further 7.5% slump in sales in the spring. |
| On Thursday, the Walmart-owned chain revealed the drop in sales at established stores for the three months to 30 June – a major worsening of performance after a 5.7% fall in the previous three months and its eighth quarter of decline. One retail analyst described the grocer’s performance as “fairly calamitous”. | On Thursday, the Walmart-owned chain revealed the drop in sales at established stores for the three months to 30 June – a major worsening of performance after a 5.7% fall in the previous three months and its eighth quarter of decline. One retail analyst described the grocer’s performance as “fairly calamitous”. |
| Walmart’s chief financial officer, Brett Biggs, admitted Asda had failed to win back customers from rivals. “In the UK, fierce competition and food deflation continue to challenge the market, significantly impacting traffic,” he said. | Walmart’s chief financial officer, Brett Biggs, admitted Asda had failed to win back customers from rivals. “In the UK, fierce competition and food deflation continue to challenge the market, significantly impacting traffic,” he said. |
| But despite suggestions that Asda would try to win back shoppers from the likes of Aldi and Lidl with aggressive price cuts, Biggs said the company remained “committed to the previously announced five-year £1.5bn price investment”. | But despite suggestions that Asda would try to win back shoppers from the likes of Aldi and Lidl with aggressive price cuts, Biggs said the company remained “committed to the previously announced five-year £1.5bn price investment”. |
| “Our strategy 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,” he said. | “Our strategy 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,” he said. |
| Neil Saunders, chief executive of industry analyst Conlumino, said: “In our view this is a fairly calamitous outcome and one that certainly reflects the challenges of the UK market, but also underlines the inadequacy of Asda’s response to it.” | Neil Saunders, chief executive of industry analyst Conlumino, said: “In our view this is a fairly calamitous outcome and one that certainly reflects the challenges of the UK market, but also underlines the inadequacy of Asda’s response to it.” |
| He said Walmart needed to invest more in price cuts as its traditional low price image had been blunted by heavy competition from Aldi and Lidl. | He said Walmart needed to invest more in price cuts as its traditional low price image had been blunted by heavy competition from Aldi and Lidl. |
| “Walmart, as the biggest retailer in the world, has the firepower and expertise to fight back, but up until now it has been a sleeping giant. These figures will act as a wake up call and that position will, in our view, now change,” he said. | “Walmart, as the biggest retailer in the world, has the firepower and expertise to fight back, but up until now it has been a sleeping giant. These figures will act as a wake up call and that position will, in our view, now change,” he said. |
| But Clive Black, a food retail analyst at broker Shore Capital, said Asda’s problems were not just about price and it was no surprise that the company was not planning to hit the “nuclear button” on a price war. | But Clive Black, a food retail analyst at broker Shore Capital, said Asda’s problems were not just about price and it was no surprise that the company was not planning to hit the “nuclear button” on a price war. |
| “Asda has got a stronger price perception and relation than a lot of its competitors and it is still underperforming. They have to look at a whole lot more. Their stores are boring and functional and they have lost the art of selling. Product quality is poor and reflects elements of their supply chain and low staff morale.” | “Asda has got a stronger price perception and relation than a lot of its competitors and it is still underperforming. They have to look at a whole lot more. Their stores are boring and functional and they have lost the art of selling. Product quality is poor and reflects elements of their supply chain and low staff morale.” |
| Asda has been losing market share for the past two years as Aldi and Lidl expanded rapidly, while bigger rival Tesco has improved its prices and service. Price deflation and the rise of online shopping, combined with the use of small local grocery stores, have driven sales declines at all the major traditional supermarket chains. | Asda has been losing market share for the past two years as Aldi and Lidl expanded rapidly, while bigger rival Tesco has improved its prices and service. Price deflation and the rise of online shopping, combined with the use of small local grocery stores, have driven sales declines at all the major traditional supermarket chains. |
| But Asda, which does not operate a chain of small local stores and has based its marketing around price, is faring far worse than its major rivals. | But Asda, which does not operate a chain of small local stores and has based its marketing around price, is faring far worse than its major rivals. |
| The group ousted Andy Clarke from his role as chief executive in June and replaced him with Sean Clarke, a former Asda employee who most recently ran Walmart’s Chinese business. | The group ousted Andy Clarke from his role as chief executive in June and replaced him with Sean Clarke, a former Asda employee who most recently ran Walmart’s Chinese business. |
| Sean Clarke said: “Although Asda is in midst of a very challenging period there is no doubt in my mind that the culture that has always been at the heart of our success is still there. We’ve also started one of the biggest journeys of reinvention in our history to further build on our strong offer and I feel positive about the future.” | Sean Clarke said: “Although Asda is in midst of a very challenging period there is no doubt in my mind that the culture that has always been at the heart of our success is still there. We’ve also started one of the biggest journeys of reinvention in our history to further build on our strong offer and I feel positive about the future.” |
| Asda recruited Roger Burnley, Sainsbury’s operations head, last October and some analysts expected him to replace Clarke once his year-long notice period from Sainsbury’s was over. Burnley will become deputy chief executive when he arrives in October. | Asda recruited Roger Burnley, Sainsbury’s operations head, last October and some analysts expected him to replace Clarke once his year-long notice period from Sainsbury’s was over. Burnley will become deputy chief executive when he arrives in October. |
| Walmart’s chief executive, Doug McMillon, said: “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.” | Walmart’s chief executive, Doug McMillon, said: “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.” |
| In the US, Walmart revealed a better than expected 1.4% rise in sales at established stores, excluding fuel, while total sales for the group rose 0.1% to $119.4bn in the three months to 31 July. | In the US, Walmart revealed a better than expected 1.4% rise in sales at established stores, excluding fuel, while total sales for the group rose 0.1% to $119.4bn in the three months to 31 July. |
| The company lifted its profit expectations for the year as it revealed a 1.6% rise in operating profit to $6.2bn. Asda said its US operation had performed well because it had improved its stores, online operation andits prices. | The company lifted its profit expectations for the year as it revealed a 1.6% rise in operating profit to $6.2bn. Asda said its US operation had performed well because it had improved its stores, online operation andits prices. |