Asda winning supermarket price war as sales rise

Graham Ruddick
Telegraph UK

Asda only one of “big four” supermarkets that is growing as it reports increase in like-for-like sales despite pressure on grocery retailers
Asda is winning the opening skirmishes in the supermarket price war after reporting an increase in like-for-like sales for the last quarter.
Despite grocery sales growing at the slowest pace for a decade and rivals reporting a sharp dip in sales, Asda said the like-for-like sales grew by 0.5pc in the 10 weeks to the end of June.
Asda was the first of the “big four” to commit to lowering prices significantly late in 2013, when it pledged to invest £1bn into cutting prices over the next five years in order to compete with the rising popularity of the discounters Aldi and Lidl.
The company, which is owned by the world’s biggest retailer Walmart, now appears to be reaping the benefits of that move.
Asda’s performance is in marked contrast to Tesco,Morrisons, and Sainsbury’s which reported falls in like-for-like sales of 3.7pc, 7.1pc, and 1.1pc respectively in their most recent trading updates.
Andy Clarke, chief executive, said: “The last quarter has seen unprecedented change within the food retail sector, and whilst I do not underestimate the challenge currently presenting retailers, I am proud that our business identified and put plans in place to respond to these changes early.
“We have a clear five year strategy based on everyday low prices and we continue to implement that strategy with agility and pace.”
Britain’s leading supermarkets are facing unprecedented pressures as shoppers cut back on spending and switch from out-of-town stores to smaller convenience stores and the discounters Aldi and Lidl.
However, despite the rise in sales for Asda, Walmart warned that sales in the US were flat and lowered its profits forecast for the year.
Doug McMillon, Walmart chief executive, said: “We wanted to see stronger comps in Walmart US and Sam’s Club, but both reported flat comp sales.”
Asda’s performance is being boosted by its online operations. The retailer is rolling out click-and-collect points for shoppers, which allow consumers to pick-up online grocery orders, and expects this service to grow from 10pc of all online orders to 30pc within five years.
Asda also wants to revamp its stores during the next year. Mr Clarke said the company will conduct 86 remodels and 87 refurbishment projects during 2015, as well as trialling three new formats at its larger stores.
Mr Clarke said: “Innovation, low prices and customer service remain at the heart of our business and over the coming months and years we will continue to implement and build on this successful strategy as we constantly look at new and improved ways to run our business.”
Clive Black, analyst at Shore Capital, said: “Asda has been the most alive of the Big Four superstore players in the UK grocery scene in recent times to our minds.
“Whilst it has to be said that each of the big players were caught ‘sleeping at the wheel’ to us through the depths of the economic downturn, by over-focusing upon an amalgam of putting up prices, depending up promotions and protecting gross margins – so letting the discounters gain a strong foothold – Asda ‘smelt the coffee’ first and changed for the better in our view.
“In changing for the better we mean for its customers and ultimately its owner Wal-Mart with respect to its trading performance and potential financial out-turn.
“The coffee smelling exercise by Asda has not been easy for management, but it has been necessary. Asda identified early growing customer mistrust of the Big Four and their trading strategies. Whilst an eagle eye was not necessary to us, the group recognised earlier than its major competitors just why the limited assortment discounters and high street value retailers were gaining share apace and, in particular, from the majors; punters were more alert than the supermarket bosses.
“Accordingly, Asda started a programme or work to simplify its offer, prioritise pricing and so reducing vouchering and promotional activity, but also taking a hard look at its cost base.”