UPDATED: Asda’s ray of hope despite another sales fall

Asda's CEO Sean Clarke
Asda's CEO Sean Clarke
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Supermarket chain Asda has posted another fall in sales, although trading has improved as price cuts and turnaround efforts start to pay off.

The Leeds-based chain – which is owned by US giant Walmart –reported a 5.8 per cent fall in like-for-likes sales, excluding petrol, in its third quarter to September 30.

This comes after a dire previous three months, when the group reported a 7.5 per cent sales plunge in its worst quarterly performance on record.

New chief executive Sean Clarke, who took up the reins on July 11 after being parachuted in to replace previous CEO Andy Clarke, has slashed prices of everyday items as he attempts to arrest falling sales at the group.

Mr Clarke said: “We have lowered thousands of prices, improved hundreds of own-brand products and invested in more hours for colleagues on the shop floor – so it’s encouraging to see more customers shopping with us in stores and online.”

Asda announced in September that it was lowering thousands of prices on everyday favourites by an average of 15 per cent, with items such as beef, chicken and sausages all becoming cheaper.

The move, which is part of a new value campaign dubbed That’s Better, has also seen Asda improve the quality of its own-brand ranges.

Walmart chief financial officer Brett Biggs said: “The key priority remains driving an improved customer experience and building sales momentum by simplifying the offer, improving product availability and making strategic investments in service and price.”

Asda, Tesco, Bradford-based Morrisons and Sainsbury’s are attempting to fend off the challenge from German discounters Aldi and Lidl, which have taken market share from the so-called Big Four.

Their problems have been compounded recently by the plunge in the value of the pound since the Brexit vote, which is putting pressure on suppliers to raise prices to cover increasing costs.

Recent supermarket share figures confirmed Asda making strides in its recovery. Kantar Worldpanel said Asda’s sales dropped 5.2 per cent in the latest quarter – the slowest decline for four months.

Sales of its premium own-label range increased 8 per cent, according to Kantar, although its market share declined by one percentage point to 15.6 per cent.

But it is being outpaced by Big Four rivals, with Tesco increasing its market share for the first time in five years after Kantar said its sales rose by 1.3 per cent.

Morrisons also recently saw like-for-like sales growth in the third quarter – up 1.6 per cent thanks to a boost from Halloween.

Commenting on Asda’s figures, Phil Dorrell, a partner at Retail Remedy retail consultants, said the supermarket had made the right decision to steer clear of ‘Black Friday’ – the name given to the day after the American holiday Thanksgiving, when shops in the US drop their prices for 24 hours. It’s a tradition that has been imported to the UK in recent years.

Last year, Asda revealed that it would not be part of Black Friday, citing “shopper fatigue” around the one-day sales event. Asda said customers had said they would prefer to see lower prices in the run-up to Christmas, instead of big discounts on just one day.

Former CEO Andy Clarke said Asda’s decision not to hold a Black Friday sale in 2015 had been vindicated.

Mr Dorrell said that Asda’s decision to avoid Black Friday brought the focus on “good value through everyday prices, suiting the demographic rather than getting drawn into what has become a fortnight of margin erosion and bringing sales forward”.

Mr Dorrell also said Asda’s ‘Christmas Made Better Campaign’, which uses short, sound-bite ads to help boost festive sales, was effective and memorable.