In Depth

Asda surprises with first sales rise in three years

Growth has been partly at expense of profits, figures show

Asda to change promotions after watchdog crackdown

27 April

Asda is to change its pricing and promotion policies after being rebuked for "breaking the rules" by the retail watchdog.

 

Following an inquiry into supermarket pricing, the Competitions and Markets Authority (CMA) warned that some promotional practices run by the UK's major grocers "could mislead shoppers" and "could be in breach of consumer law".

 

It singled out Asda in particular "in relation to specific areas of concern". These included "was/now" price offers and multi-pack deals.

 

In response, the supermarket has given a written commitment to the following:

 

  • items will no longer be sold at a "now" price for longer than the "was" price, ensuring there is a meaningful comparison between old price and new;
  • multi-buy deals will represent better value than a single product before the offer;
  • multi-buy offers will no longer be immediately followed by "was/now" promotions.

 

Richard Lloyd of Which?, which launched the original complaint that led to the inquiry, said the supermarket had been "found breaking the rules" and would have to "clean up its act", reports the BBC.

 

"We are pleased to see the CMA investigation has resulted in Asda taking action to stop misleading special offers," he said.

 

James Daley, of consumer body Fairer Finance, told the Daily Telegraph: "Supermarkets which are not willing to abide by the rules should be publicly shamed as they are using confusing pricing for their own commercial gain.

 

"Once customers know supermarkets and trust that they offer good value, it is easy to tempt them to spend more with misleading deals. Companies deliberately do this to confuse and deceive customers.

 

"The CMA must send out the message that no matter how big they are, they are not above the law and the rules."

 

According to the government-backed Money Advice Service, promotions of this sort "seduce" customers into spending an extra £1,000 a year.

 

 

Asda posts worst quarterly sales ever

18 February

Asda has posted its worst ever quarter-on-quarter sales performance as it struggles in the face of a huge advance from the German discounters, Aldi and Lidl.

Coming much later than its "big four" rivals Tesco, Sainsbury's and Morrisons, due to the timing of its US parent Walmart's quarterly results announcement, Asda's figures for the three months culminating in the critical Christmas trading period reveal like-for-like takings fell 5.8 per cent.

This is worse than the 4.7 per cent dip in the second quarter of last year that prompted boss Andy Clarke to say it had reached a "nadir", the Daily Telegraph notes. It means the supermarket's sales for 2015 as a whole fell 4.7 per cent.

The figures also mean Asda has substantially underperformed its main competition. Tesco and Morrisons registered modest gains over the festive season while Sainsbury's saw a much smaller dip. In the most recent industry-wide index, published monthly and covering rolling 12-week sales, Asda was again the worst performer, shedding 3.8 per cent.

In contrast, Sainsbury's, which leapt above its rival to become the second largest grocer last year, rose for the sixth consecutive period.

Clarke, however, claimed Asda's Christmas sales were "commendably stable" in the face of the wider industry upheaval. He said the company is taking "decisive action" to tackle its slide, including investing up to £1bn in price cuts, cutting staff at its head office and, The Guardian reveals today, seeking new investment and discounts from suppliers.

The paper says major suppliers have been called in for individual meetings during which they have been "asked for millions of pounds and asked what they want in return", according to sources.

Asda to cut hundreds of jobs from Leeds head office

Asda is about to cut hundreds of jobs at its head office as it continues to adjust to what it describes as a "permanent structural change" in the industry.

In response to press reports this morning, the supermarket group confirmed changes that would result in job losses in the "low hundreds". The BBC says it understands around 300 jobs will go from the 3,500 currently employed at the Great Wilson Street headquarters in Leeds.

In a statement, the firm, the UK's third-largest supermarket group by market share, said: "It's well documented that in recent years, customers have radically changed the way they shop. We were the first of the 'big four' to recognise this and launch a new strategy in 2013, yet the external pressures have accelerated at an increasingly rapid rate over the last 18 months.

"As a result, the industry faces major challenges and the certainty of permanent structural change. In the context of this, we also have to further change the way we do business. Today, we have started to talk to our colleagues in head office functions about what this means for them. We have made some difficult but necessary decisions."

The hegemony of the "big four" has been blown apart in the past few years by an onslaught from German discounters Aldi and Lidl, which have quickly nabbed around ten per cent of the market. Shoppers have ditched single large-shopping trips and a price war to secure fragmented footfall has eaten into bigger stores' profits.

A Christmas fightback saw Sainsbury's hold steady and both Tesco and Morrisons surprise with an increase in sales, but industry tracker Kantar Worldpanel reckons Asda fared worse, with a steep 3.5 per cent decline, Sky News notes. Observers note the group's focus on price leaves it most exposed to the strategy of the discounters.

Asda won't reveal festive season trading figures until its US parent, Walmart, updates Wall Street in February. Earlier this month, the supermarket unveiled a fresh £500m investment in price cuts in the UK, on top of the £1bn of reductions announced in 2013 that are being phased in over five years.

Asda in fresh £500m assault as price war intensifies

11 January

Asda has intensified the supermarket price war by unveiling a fresh £500m investment into price cuts as it attempts to halt a prolonged slide in sales.

The new reductions are in addition to the £1bn of discounts announced in 2013 that are being phased in over five years, Sky News says. Asda boss Andy Clarke warned "radical action" is needed to win back customers amid an onslaught from discounters Aldi and Lidl, which have grown rapidly to account for collectively 10 per cent of purchases.

Asda has long been seen as most exposed to the challenges of the German stores as its selling point to customers focuses on cost. Sainsbury's, on the other hand, which last year jumped ahead of its rival to take second place in the sector overall, has seen strong sales of its quality ranges and has consistently outperformed its peers.

But the persistent deflationary environment caused in part by the intense competition on pricing is hitting all brands in the sector. Previously rising Waitroselast week revealed sales fell 1.4 per cent over Christmas, with the chairman of its parent John Lewis saying: "If broccoli is half price, you and I have to eat twice as much for us to make the same money."

This week, the three listed grocers will update on their Christmas trading, while wider industry market share figures will come out tomorrow. Analysts are expecting a modest 0.7 per cent like-for-like fall in sales at established Sainsbury's stores, The Guardian notes, which would mean overall sales were likely up. Tesco and Morrisons are forecast to shed 2-3 per cent each.

Asda, which is owned by US giant Walmart, does not report its own numbers until mid-February, but is estimated to have seen the biggest sales fall of the "big four" with 3.5 per cent.

Asda halts expansion in London and online

20 October

Asda has become the latest of the so-called 'big four' supermarkets to launch a back-to-basics turnaround plan, a move that reflects a change in direction among established brands in a sector that's currently undergoing major upheavals.

An 18-month plan billed as a "project renewal" will see the UK's second-largest supermarket chain shelve the planned expansion of smaller sites in London and introduce 'click and collect' hubs for online shoppers, the Daily Telegraph reports.

In a bid to reduce costs and refocus on its "core business", the store will also shelve the roll-out of standalone petrol stations and close a new unit set up to deal directly with business customers.

The plans come after the supermarket giant reported the worst results in its history for the three months to June, when like-for-like sales fell by close to five per cent (see below). The group has been the worst hit by the rapid growth of the German discounters Aldi and Lidl, which are stealing its thunder as the go-to grocer for cost-conscious shoppers.

As the price war with its main rivals continues to rage, the new project will see another round of price cuts across Asda's "everyday products". Prices have been falling across the sector for more than a year – and recently resulted in both Tesco and Sainsbury's reporting a decline in revenue despite an increase in shoppers and average shop size.

Asda's chief executive Andy Clarke insists the group will not follow its rivals by launching voucher schemes that repay shoppers for price differentials in a bid to nullify competition.

Speaking about the turnaround plan, Clarke told The Guardian that Asda needed to "simplify what we do by prioritising the first line of our strategy – improving our core business and pausing activity in other areas so that we are not spread too thinly."

The supermarket giant's new approach appears to be similar to that of Morrisons, which in a bid to reverse its sales slide sold off its unprofitable convenience store arm and plans to close a number of unprofitable supermarkets. Tesco has also been downsizing recently, putting the brakes on new store development and closing down a number of underperforming supermarkets, as well as selling off its non-core assets.

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