Google News
spot_img

Snow clouds over Asda sales growth

Must Read

On a snowy morning in February, the café at Asda’s supermarket on the Isle of Dogs in east London is doing a brisk trade in its value fried breakfast.

Young mums, couples, old age pensioners and local workers are keen to tuck into the traditional fry-up for £2.20, as the sky darkens outside, and the weather turns more wintry.

In other respects, the snow has been bad news for Asda, the UK arm of Walmart, the world’s biggest retailer. It blames the severe weather for slowing sales growth either side of Christmas.

But recent industry data has raised concerns about whether the snow is the only factor at play, and the UK’s second-biggest supermarket chain is set to face questions on Thursday, when its parent reports its annual results and it delivers an update.

“The snow undoubtedly played a part, but others grew market share despite the weather,” says Greg Lawless, analyst at Collins Stewart.

Clive Black, analyst at Shore Capital, says: “It is a little bit perplexing. Asda has been in very good shape for the last couple of years.”

According to Kantar Worldpanel, the consumer research group, Asda experienced the slowest growth of the big four supermarkets over Christmas and into the new year.

In the four weeks to January 24, sales through Asda’s tills rose just 2.1 per cent, compared with 5.1 per cent for Tesco, 5 per cent for J Sainsbury and 9.5 per cent for Wm Morrison.

Consequently, Asda’s market share slipped in the four-week period, and in the 12 weeks to January 24 when it fell from 17 per cent to 16.9 per cent. This is in stark contrast to the situation a year earlier, when Asda’s market share stood at a record 17.2 per cent.

Asda blames the slowdown on the weather.

It notes that although it has the second-biggest market share, after Tesco, it has the smallest number of stores of the big four supermarket groups.

This means that customers often have to drive to an Asda store, something they were reluctant to do amid snow and ice.

People familiar with the data argue that it should not be judged on a few weeks’ market share figures, which also include other supermarkets’ new space. They also point out that Asda faced tough comparatives as it grew strongly in the year earlier period. Indeed, they claim, indications are that Asda will still report robust trading on Thursday.

Nevertheless, the weather has shone a harsh light on the fact that Asda does not have as many different types of stores as rivals, such as Tesco and J Sainsbury, which have convenience arms.

Although it runs stores from 8,000 sq ft to 102,000 sq ft, it is still best known for out-of-town, superstores.

Asda is expected to emphasise smaller formats of under 25,000 sq ft when it sets out its plans for the next year or so on Thursday. However, it will insist that this is not a convenience format. It will also continue to develop stand alone non-food stores.

“Unless Asda actually develops a successful format outside of the superstore or hypermarket, it runs the risk of not being able to gain as much incremental share as it would want to,” says Mike Dennis, analyst at MF Global.

Asda is also facing an increasingly muscular Tes- co, thanks in part to its beefed-up Clubcard loyalty scheme, while Morrison, which overlaps with Asda both geographically and in emphasising price, continues to power ahead.

“Certainly, Morrison and Tesco are eating some of their lunch,” says one executive.

Asda remains the only one of the big four not to have a loyalty offer. Though Morrison does not have a regular loyalty card, it did repeat its successful Christmas loyalty offer, which boosted sales.

Asda has railed against loyalty cards. Andy Bond, chief executive, said last year that loyalty could not “be bought with plastic points or vouchers”, and there are no signs of Asda changing its stance any time soon. But according to Mr Lawless, this leaves Asda reliant on price to lure shoppers into its stores, as competition intensifies.

“With just price Asda is looking increasingly onedimensional. It is a one-club golfer,” he says.

While Asda has always been price oriented, it added significant promotional activity last year. It has since reversed this, to focus on everyday low prices, although there were promotions in evidence at the Isle of Dogs store.

Last month, Asda unusually ran a voucher promotion in the press, offering customers £5 off a £50 shopping bill, or £10 off £100. It has no plans to repeat this.

Asda also faces the loss of Anthony Thompson, who runs its successful George clothing business, to become chief executive of Fat Face, the casual fashion retailer. His successor is expected to be announced in a few weeks’ time.

According to Mr Black it would be premature to jump to conclusions from December and January data. “A steady Christmas and a seemingly weak January don’t necessarily make a trend. We need to see the February, March and April market share data to establish whether an event becomes a trend,” he says.

Source: Financial Times

Latest News

Honasa Consumer enters into high performer cosmetics

The company is looking to capture untapped potential of the fast growing colour cosmetics industry in the BPC spaceNew...