Leeds-based Asda suffers dip in sales as Brexit hits consumer spending

Walmart has published its earnings for the third quarter of 2019 including financial results for its UK business, Asda for the period 1 July to 30 September 2019.

Over the third quarter of 2019, the supermarket posted a 0.5 per cent decline in like-for-like sales excluding petrol. Online grocery sales during the same period remained strong with continued growth ahead of the market.

Speaking on the Walmart earnings call, Walmart CEO Doug McMillon commented on the UK market: “In the U.K., concerns over Brexit continue to negatively affect customer spending patterns… comp sales declined 50 basis points during the quarter but improved sequentially compared with the Easter-adjusted comp from the second quarter… online grocery sales continue to be strong with growth ahead of the market according to Kantar… roughly two times the growth of the overall market.”

Walmart CFO Brett Biggs added: “We’re continuing to manage through political and/or economic challenges that are affecting growth in several of our international markets, including the UK and Central America, which both had negative comps in the quarter. But overall, our operating fundamentals are improving.

“In the UK comp sales declined 0.5 percent as customers’ concerns over Brexit continue to weigh on results. Despite this challenging environment, the Asda team continues to drive operational and service improvements that are resonating with customers, including strong growth in online grocery.”

Asda CEO and President Roger Burnley commented: “This quarter has afforded consumers little respite from political or economic uncertainty and this has shown in their spending. However, we have remained focused on doing the right things for our customers. We continue to work hard to keep prices low for our customers as well as driving quality and improving our shopping experience. Our core online business has continued to outpace the market, achieving double-digit growth and customers responding well to developments to the service including our award winning ‘shop by recipe’ feature. We have also invested in improving 15 stores this quarter, which has resulted in an improved overall customer experience.

“We have maintained our focus on innovating where customers care – a mantra that extends beyond technology, but also into the way we respond to the demands of our communities, both local and global. This quarter has seen us step on even further with our commitments to reducing the amount of plastic used across our business including moving our entire range of own-brand ready meals to recyclable packaging, removing plastic pots from our fresh growing herbs and introducing reusable fruit and veg bags. We have also continued to step on delivery of our Creating Change for Better strategy and completed the rollout of our back of store food donations programme to all of our superstores and supercentres, along with reaching the milestone of having donated over 1 million meals to local charities.

“I am absolutely committed to securing the future of our business for the benefit of our colleagues, our customers and our communities – whatever external challenges we may face. As we enter the busiest trading period of the year, I am confident that we are ready and raring to go and I would like to take this opportunity to say thank you to every one of our colleagues, who I know will pull out all the stops to make this Christmas extra special for our customers. Whilst the retail sector continues to face challenges as a whole, I know that Asda is built on strong foundations and is at its best when we are able to work as one team, delivering for our customers.”

Strong online growth is keeping Asda marginally ahead of the competition, according to analysts at GlobalData

Thomas Brereton of GlobalData, said: ‘‘Despite Asda’s Q3 results revealing negative l-f-l (like for like) sales growth – blamed on consumers restricting spend as a result of political and economic uncertainty – it performed better than its Big Four competitors, with a fall of 0.5 per cent slightly less harsh than the 0.7 per cent l-f-l sales decline experienced on average of results available so far.

He added: “Asda was quick to focus on its buoyant online business, which again saw double-digit growth, and its online grocery penetration now sits well ahead of the market’s overall 7.3% level.

“Asda has had a fairly quiet quarter with respect to the announcement of new concepts and strategies, with the most prominent being recent accelerated plastic reduction commitments to reach 30% recycled content in its plastic packaging by the end of 2020 – five years ahead of its original deadline.”