Asda must ‘hold its nerve’, as sales slide: boss

The last quarter had been “unprecedented” but Asda would remain healthy, Clarke claimed.

“Although I still believe that 18 months ago we did a great job of predicting changes, we could not have foreseen what’s happened to others and the moves they have had to make in order to restore their business – creating an impact on us in the short-term,” he said.

“Fundamentally, Asda remains a balanced, healthy sustainable business with a clear direction allowing us to hold our nerve and remain focused on delivering for our customers.”

Surprised at challenging quarter

Leading City analyst Shore Capital said it was surprised Asda had had a challenging quarter having predicted the market more effectively than its competitors and taken steps to meet changing market conditions.

“Asda particularly identified the challenge of the limited assortment discounters and cut its cloth accordingly and fully embraced online, albeit [it] is not well positioned to make material progress in convenience,” analysts Clive Black and Darren Shirley said.

There were several factors behind Asda’s disappointing performance, including unfavourable market conditions, deflation, the re-awakening of market leader Tesco and Morrisons’ trading stabilisation, they added.

“Asda may have suffered a little from a retrenchment of promotions, a drug that the industry is suffering from, albeit as a result the chain’s margins may be cleaner and better given the inefficiencies of many offers whilst we do not believe that Mr Clarke has been helped in his tasks by a persistent brain drain from Asda to Wal-Mart,” Black and Shirley said.

Price investments

Retail analyst Conlumino said Asda’s sales slump was down to a fall in purchase volumes and its own price investments focused around base prices.

Its market leading ‘Every Day Low Prices’ positioning represented a key weapon, it added.

Conlumino senior consultant, George Scott, said: “We remain positive about Asda’s long-term outlook, amid the continued structural changes in the UK grocery market. The discounters, Aldi and Lidl, continue to post strong sales growth via offers that are evolving around quality as well as price.”

There was an increasing need for the big four retailers to ease off the sort of multi-faceted promotional activity which could often confuse consumers, and position themselves through clearer pricing strategies, Scott added.