ASDA has reported its first fall in underlying annual sales since the financial crisis struck in 2008 and blamed the decline on short term gimmicks by “struggling” rivals.
At a time when competitors are luring customers through the door with money-off vouchers and coupons, Leeds-based Asda has refused to get involved and has stuck to its Every Day Low Pricing strategy.
Asda reported a 2.6 per cent decline in like-for-like sales in the 12 weeks to January 4 and a 1.0 per cent fall in 2014 underlying sales, its first annual sales fall since 2008.
The firm’s chief executive Andy Clarke said that if rivals’ vouchering was taken out of the equation, the group would have seen positive like-for-like sales.
Mr Clarke accused his rivals of “giving away £10 notes for £9” and likened their strategy to the Bank of England’s quantitative easing policy.
“There is no doubt that the amount of activity in Q4 by struggling retailers has impacted the overall market and how we traded,” he said.
“I took a decision with the board that, strategically, staying focused is most important in the medium to long term, not taking short-term knee-jerk decisions that others might do.
“We won’t play that game. We’ve got a profitable business model that is satisfying customers and shareholders. We will not be dominated by short term tactics.”
“You can only give away £10 notes for £9 for so long,” he said, adding that “at some point sanity will take over from vanity“.
He accused rivals of taking the decision to drive unprofitable sales and said that Asda’s profits were in line with the group’s total sales growth of 0.5 per cent.
The big four supermarkets are losing hundreds of thousands of shoppers to German discounters Aldi and Lidl.
Asda’s 2.6 per cent decline in fourth quarter like-for-like sales compares with market leader Tesco’s 2.9 per cent decline in the 19 weeks to January 3.
Sainsbury’s like-for-like sales fell 1.7 per cent in the 14 weeks to January 3 and Morrisons’ were down 3.1 per cent in the six weeks to January 4.
A price war plus commodity deflation have led to a sharp fall in food prices and Mr Clarke said he expected this to continue for 2015.
He added that the industry could well be in decline for up to two years.
Asda announced plans to invest an additional £600m in 2015, opening 17 new stores, 36 petrol stations, over 150 remote click & collect sites and re-modelling 62 stores.
Mr Clarke also said the firm will launch a “brand refresh”, changing aspects of its brand to replicate parent Wal-Mart including a new logo that adopts Wal-Mart’s sunshine symbol.
Last year Asda spent £300m into cutting prices, £100m more than planned, as part of a five-year £1bn investment in price cutting.
The group claimed it is now 10 per cent pricier than the discounters and eight per cent cheaper than its three main rivals, Tesco, Sainsbury’s and Morrisons.
Separately Wal-Mart reported better-than-expected fourth-quarter profit.