Asda reported steepest drop in sales ever, down 5.8%

UK supermarket chain Asda reported its worst drop in sales ever. Sales at the Wal-Mart owned retailer dropped 5.8% during the three months up to the end of the year after a drop of 4.5 percent in the previous quarter.

Sales dropped 4.7% over the year as a whole.

Asda was the worst performer of the ‘big four’ UK supermarket chains over the Christmas trading period.

Asda reported a record drop in sales for the fourth quarter.

Asda’s price advantage

CEO Andy Clarke said that Asda managed to reduce its price disadvantage against discounters down to 11 percent from 23 percent whilst maintaining its price advantage over Tesco, Sainsbury’s and Morrisons, of approximately 8 percent.

“We have maintained the strength of our price position against the big grocers at a time when they have significantly altered their operating (profit) margins to support their organisations,” said Clarke.

“I would suggest … In the medium to long term, that’s unsustainable.”

Forward guidance

Clarke expects a gradual improvement in sales this year, but remains confident that the firm would maintain profitability as it did last year.

Clarke was quoted by Reuters: “In the long run we’ll win in this market,”

“Market share is important to us … But what’s more important is financial control and stability. That’s going to give us an advantage to win in this market.”

However, George Scott, senior analyst at Verdict Retail, told the BBC that Asda’s strategy was not yet working: “Asda’s now prolonged story of negative [sales growth] shows that it has not done enough to broaden its appeal beyond price.

“Away from price, Asda has a relatively weak reputation for quality… it also needs to do more to improve its staffing levels, adding reasons to visit, if it is to claw back ground from the discounters.”