Asda invests £600M in stores as sales slide

Shore Capital director and head of research Clive Black said he believed Asda’s management would be “disappointed”​ with the outcome.

“Indeed, given that Asda’s stores have been pretty well set up from our visits over the last 18 months, we are surprised that the business moderately disappointed over Christmas and that it is now losing market share according to the most recent Kantar data.​

‘Disappointing’​

“Asda’s recent disappointing trade also corresponds with an improving trading position from market leader Tesco and a comparative induced improvement from Morrisons. With both of its key competitors regrouping, Asda may find the going quite challenging in the year ahead too.”​

Speaking at an event in London this morning (February 19), Asda president and ceo Andy Clarke warned that the retail market remained “in one of its most challenging and changeable periods in history”​.

Asda today unveiled its fourth quarter and full year financial results for 2014, posting a 1% fall in like-for-like sales for the year to December 31 and a 2.6% fall in the 12 weeks to January 4, in a quarter when the retail market as a whole slowed significantly.

“2014 saw an acceleration in the structural shift in the market and while we saw it brewing and put the right plan in place to address it – delivering solid wins for our business and keeping the ship steady in a turbulent market, the pace and scale of change has exceeded all expectations,”​ said Clarke.

‘Leading the price agenda’​

“The first year of our plan was very much about building the foundations – a workout to limber us up for what is to come in 2015 – by leading the price agenda in a deflationary market. We have a clear plan for sustainable, profitable growth and a proposition that gives customers what they want.​

“I’m pleased that we can announce our continued investment in the UK with £600M for new and improved stores in 2015. With such a powerful force like Walmart behind us that fully supports our strategy, we’re in a unique position in a difficult market – a position of great strength.”​

Clarke outlined that in 2015 Asda would invest in:

• 17 new store openings in 2015, including three supermarkets in London
• 62 stores, which would will undergo a major remodel to reflect changing shopper habits
• The creation of more than 150 new remote Click and Collect sites
• 36 new petrol stations

Clarke also welcomed news that Asda’s parent company Walmart would draw on the expertise of subsidiary International Procurement and its online grocery team to boost global sourcing and web operations.

‘Massive recognition’​

Clarke called this “a massive recognition of the contribution, knowledge and experience that sit in our teams in the UK”​.

Reviewing 2014, Clarke said major wins had included:

• A £300M investment in lowering prices – £100M more than planned as part of its five year pledge to invest more than £1bn in reducing the cost of living for its customers;
• Opening 17 new stores, unveiling its new format proposition at its Grantham superstores and announcing eight further ‘store of the future’ remodels for this year;
• 200 new ‘click and collect' sites, taking the total to 600 by the end of last year – more than half way to Asda’s 2018 target of 1,000;
• Doubling the number of click and collect points it had at London Underground stations since November 2013.

In September 2014, Asda acquired click and collect technology, developed in Holland, that would allow customers to collect their shopping from temperature controlled pods in under 60 seconds.

The first was due to open on a major commuter belt between Manchester and Liverpool in St Helen’s from the second financial quarter of this year, said the retailer.