The Walmart-owned retailer, which is performing much worse than its competitors Tesco, Sainsbury and Morrisons, announced that it would not raise spending on cutting prices above the £1.5bn previously announced.
This news came despite the increased competition Asda was facing from hard discounters Aldi and Lidl, together with an estimated 6% drop in in-store traffic.
The latest results followed a 5.7% fall in sales in the previous three months.
‘Retail Armageddon’
However, stockbroker Shore Capital dismissed suggestions that Asda’s results indicated “retail Armageddon”. It doubted a “nuclear price war” was about to hit the UK retail sector.
“In sticking to the five-year 2013–18 plan to invest £1.5bn (it was originally £1bn, raised in December 2015) in prices, we believe that this is actually a more sanguine outcome than we expected, firmly questioning the analysis of those purporting the nuclear option,” said Shore Capital’s analyst Clive Black.
Black said the plan for Asda remained within Walmart’s strategy, which centred on the four priorities of: actively managing the existing portfolio; delivering balanced growth; being the lowest cost operator; and building strong foundations in talent, trust and technology.
New leadership
Black welcomed Asda’s strategy under the new leadership of Sean Clarke, who took over from Andy Clarke, who stepped down last June.
“Price needs to be part of its improvement, particularly in specific areas relating to the limited assortment discounters,” said Black.
“However, there is also a need for Asda to more broadly enhance the shopping experience, for availability and store merchandising to improve, for a better assortment and product quality.”