Strategy pays off as Asda sees a return to growth

ASDA has seen a return to positive sales growth thanks to record online sales, the relaunch of its own brand label and the introduction of guaranteed everyday low prices.

The Leeds-based group, part of US retail giant Wal-Mart, said like-for-like sales rose 1.3 per cent in the three months to September 30, reversing a 0.4 per cent decline in the three months to June and a 0.3 per cent fall in the first three months of the year.

Asda's chief executive Andy Clarke said profits over the three months to September 30 grew ahead of sales, beating internal targets.

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"After a particularly tough start to the year we're pleased with the progress we're making," he said. "The new initiatives we have put in place – Asda Price Guarantee, 'Chosen By You' launch, Extra Special revamp, plus George firing on all cylinders – are all increasing the number of customers coming through our doors."

Following his promotion to chief executive in May, Mr Clarke has reduced bulk buy promotions by a third in order to focus on transparent everyday low pricing. "We won't yo-yo on price, " said Mr Clarke. "I believe customers want a more transparent approach."

Asda has launched a price guarantee, offering to refund shoppers the difference if they can find their shopping cheaper elsewhere. Around 100,000 people a week are checking prices on Asda's website and the group has slashed the price of everyday basics such as milk, eggs, and bananas.

Asda said the relaunch of its core own-brand range 'Chosen By You' has proved a big success with customers.

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The 'Chosen By You' Lemon Daisy Cupcake was the group's fastest selling bakery line, selling over 200,000 individual cakes in the first month. The range's Family Lasagne reported sales 138 per cent ahead of forecasts and The Ultimate Steak Pie sold 8,000 in the first few weeks after its launch.

The group's online operation Asda.com reported record sales, growing at around 30 per cent.

"As we approach Christmas we are in good shape and are clearly focused on delivering for our customers in three key ways – keeping our prices low, enhancing our quality and driving product innovation into our stores through the introduction of new ranges," said Mr Clarke.

Ahead of the all-important Christmas trading period, Asda is introducing dozens of new products to its upmarket 'Extra Special' range. Customers were given the chance to try the new products last month with a 25 per cent discount.

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"I'm pleased to say the Extra Special event was a huge success and drove incremental sales," said Mr Clarke. "Our premium range is in good shape and customers are responding well to the new products we've introduced this year."

The new products include sherry trifle gateaux, trout and horseradish terrine starters and mini steak-and-ale pies. Asda is also selling Christmas puddings, aged for six months, for 10.98.

The group's George clothing range continues to grow and Asda said it is outperforming the clothing market.

Asda's like-for-like sales rise is in line with the increase reported by Bradford-based Morrisons for the 13 weeks to October 31, but below the 2.0 per cent increase reported by Sainsbury's for the six months to October 28.

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Asda plans to open 10-15 new stores in 2011, in line with previous years, and extend five others.

The latest Asda Income Tracker shows that the typical family's disposable income was 4 lower in September 2010 than September 2009.

As a result Asda said its customers have started stocking up on toys and big tins of chocolates earlier this year in a bid to spread the cost of the festive period.

"We're acutely aware of our responsibility to do everything we can to keep lowering costs, and keep the cost of living down for all our customers," said Mr Clarke.

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Doug McMillon, president and chief executive of Wal-Mart, said: "We are encouraged by the recent sales momentum in the UK where we are well positioned for the holiday season. At a time where economists are forecasting very tough economic conditions, Asda remains committed to saving customers money every day."

Wal-Mart reported higher quarterly profits and raised its full year earnings forecasts, despite a fall in like-for-like sales in US stores.

Asda has set out plans to become the UK's biggest non-food retailer within five years, helped by a rapid expansion of its standalone Asda Living stores.

It currently has 26 Asda Living stores, over 175,000 employees and 383 stores.

The choice is yours

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Asda has invested 100m on the relaunch of its own-brand label after admitting the previous range had become "invisible".

The 'Chosen by you' range was launched two months ago following an intense nine months of testing and reformulating products to improve their quality. Some 40,000 consumers took part in 200,000 blind taste tests across the UK to produce the new range.

The move is part of a campaign by Asda to add quality and service to its value principle.

"Asda has always focused on price and we will continue to do that, but consumers are also demanding quality and service," said Mr Clarke. "This is the biggest own brand relaunch in UK history."

The range has 3,500 individual products including 500 entirely new ones and 1,000 reformulated products and is expected to make annual sales of 8bn-9bn.

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