Asda reports lower profits and sales in 2016
Asda reported lower profits and sales in 2016, according to accounts filed at Companies House.
Pre-tax profits at Britain’s third biggest supermarket chain fell by nearly 19% to £791.7 million, while like-for-like sales, excluding fuel and VAT, dropped 5.7% compared to the year before.
“The grocery market has continued to experience low growth throughout the year and competition in the sector has remained intense. Our sales performance, relative to the market, was behind our expectations,” the company said.
The Leeds-based supermarket chain has suffered amid increased competition from discount retailers such as Lidl and Aldi and the ongoing price war in the UK’s supermarket sector.
According to Kantar Worldpanel, Asda’s market share fell by 0.9% to 15.7% behind Tesco (27.8%) and Sainsbury’s (16%).
The retailer has made some “strategic changes” under its new boss Sean Clarke, including slashing the prices of everyday items.
In the first quarter of this year Asda reported a 2.8% drop in like-for-like sales, a slight improvement from the previous quarter which saw sales drop by 2.9%.
Sales at Asda have now dropped for 11 consecutive quarters.
Retail analysts say that Asda needs to rethink its strategy and focus on its range of products and in-store experience rather than just slash prices further.
“Sainsbury’s and Tesco have always had more opportunity for differentiation from the discounters, but Asda has chosen to focus on price rather than range and in-store experience, which has clearly been the wrong strategy.
“Asda has been flailing without direction for too long, and a comprehensive plan is needed if it is to survive in the highly competitive UK grocery market.”
In this context, differentiation is the process of distinguishing a product from others, i.e., making it stand out.