Asda returns to sales growth but brand recovery is still some way off

Asda posts first increase in sales for three years as it says focus on price and customer experience has helped attract new shoppers.

asda

Asda returned to sales growth in its second quarter for the first time in three years as investments in price and the store experience convinced shoppers to return.

Like-for-like sales (excluding petrol) were up 1.8% in the three months to 30 June, with Asda claiming one of its most successful Easter trading periods ever with total sales up 16%. Even without Easter, comparative sales would still have been up 1.1%.

Doug McMillon, CEO at Asda’s parent company Walmart, says he is “encouraged” by the return to sales growth and that investments in price and store experience are resulting in shoppers visiting more often and increasing their basket sizes.

“There’s still much more to be done, but we’re clearly headed in the right direction,” he says.

Asda has been the worst performing of the big four supermarkets for a number of quarters. Having built its brand on price and value, it has struggled to cope with the rise of the discounters and their price and quality messaging. A resurgent Tesco and Morrisons have also eaten into its sales.

Last year, Asda parachuted Walmart exec Sean Clarke in as the new CEO and put in place a new marketing team in an attempt to halt the decline. And Clarke says the “continued focus on delivering great value and service” led 275,009 new customers to shop at Asda in the quarter.

However, he admits that Asda still needs to up its game “to be in the best shape possible”.

“We will continue to work collaboratively with our suppliers to create the best products, make investments where they matter most to our customers, and ensure that we are fit for purpose in what remains a competitive market,” he explains.

Asda will also need to focus on building up its brand. According to YouGov BrandIndex, consumer perceptions of the Asda brand, while on the rise, are still severely lagging its big four rivals, as well as Aldi and Lidl and Waitrose and Marks & Spencer.

Its Index score, which measures a range of metrics including quality, impression and reputation, has barely inched up over the past year and it has a score of 14.9, putting it in ninth place in a list of 25 supermarket brands and behind all its major competitors. Buzz, a balance of the positive and negative things said about the brand, is up by a statistically significant 1.2 points but it is still in ninth place here too.

Only in terms of value does it beat its main rivals, coming in third with a score of 23 but still well behind Aldi on 46.7 and Lidl on 43.2.

Phil Dorrell, partner at analysts Retail Remedy, believes that while the uptick is sales is reassuring, more works need to be done on the brand to ensure this is not just a one-off.

He explains: “It is hard to say what Asda stands for when it is keeping up with its competitors rather than carving its own path. Asda has all the components to put together a desirable model, what it lacks is the creativity to assemble them into something the customer wants.”

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