Asda has reported its worst ever quarterly performance as like-for-like sales fell a whopping 7.5% for the three months ending 30 June.
The poor second quarter performance compares to a 5.7% fall in Asda’s first quarter and represent an eighth consecutive quarter of decline.
Former Asda CEO Andy Clarke had previously claimed a 5.8% sales drop (in the last three months of 2015) was the supermarket “reaching its nadir”. But the decline has since continued leaving Asda’s new boss Sean Clarke, who joined in June, facing an uphill battle to get things back on track.
Despite today’s woeful numbers, parent Walmart’s CEO Doug McMillon claims the Asda brand is on the right track. “In the UK, the competitive environment and food deflation continued to challenge the market, significantly impacting traffic and comparable sales,” he says.
“Our strategy to turn things around is focused on improving the retail basics.”
Doug McMillon, CEO, Walmart
Walmart plans to implement a series of steps to reverse the fortunes of Asda, including a focus on improving the retail basics and simplifying assortment. However, despite speculation Walmart would invoke “price armageddon” by forsaking profit for market share, McMillon suggested Asda’s price investment would remain £1.5bn.
As Clive Black, head of research at Shore Capital, puts it: “There has been much market speculation about what Asda may or may not do to solve its trading woes, with some suggestions that a form of retail Armageddon was about to strike the UK. Today, we believe that Walmart dispels such a possible expectation, doing as we felt it would; that is, outlining a rational plan within existing price parameters.”
In April, Asda’s chief customer officer Andy Murray appointed Saatchi & Saatchi as its new ad agency, with its most recent TV ads featuring celebrity chef James Martin. One source said the move was proof Asda had “lost control” to Walmart following a sustained period of poor sales numbers.
According to Retail Remedy’s Paul Thomas, the 7.5% decline is “apocalyptic” for Asda. He says the supermarket brand must now focus on talking up its non-food offer to differentiate from rivals including a resurgent Tesco and expanding Aldi and Lidl.
Thomas explains: “It is too soon for the new CEO to have had any significant impact but a 7.5% decline in like-for-like sales is apocalyptic for Asda. There is absolutely no honeymoon period for Sean Clarke: it’s a case of get in there and power up the defibrillator.
“Asda’s USP was that it was the cheapest grocer in the UK. They lost that crown to the discounters, which leaves them with… and there is the problem.”