British supermarket chain Asda Stores Limited, part of the Wal-Mart empire, reported a 1.6% decline in third quarter sales, compared to a 0.5% increase in like-for-like sales in Q2. All the four big retailers are now reporting falling sales.
Asda says a “shockwave” has hit the supermarket sector.
British shoppers have changed their shopping habits and preferences significantly since the 2008 financial crisis. Even though the UK’s economy has outperformed the rest of Europe, consumers have become extremely price-conscious. For the past four years, wage growth has failed to keep up with inflation. German discounters Lidl and Aldi are attracting millions of new shoppers each year, at the cost of the ‘big four’.
Asda is the UK’s second largest supermarket chain by annual sales, after Tesco. It is one of the ‘big four’ retailers that is struggling to maintain market share amid a fierce onslaught from Lidl and Aldi.
On Thursday, Asda President and CEO Andy Clarke vowed to win the supermarket war. He criticized rivals Tesco, Sainsbury’s and Morrisons in their strategies to take the German discounters head on with price-matching offers.
Mr. Clarke said “We won’t be knee-jerked into reacting to short-term tactics. Vouchers can win quarters, but strategies win decades.”
Asda doing better than other three
In an attempt to give the poor sales figures a positive spin, Mr. Clarke said he was pleased Asda was still outperforming the other three rivals in a distressed market. Asda’s market share, he added, increased 9bps to 17.3%.
In 2013, Asda took action before any of the other three to address changes in the retail market by implementing a five-year strategy that included improving its online service and driving efficiency.
Online shopping has increased by 19.6%, says Asda. It has launched two large-format trials in Granthan and Coventry.
Mr. Clarke explained:
“A year ago we took clear action to address the changes in our market and implement a five-year strategy to redefine value retailing. That is a long-term strategy that won’t be delivered overnight, but our early, decisive action has seen our business outperform our traditional competitors in a market that is in unprecedented distress.”
“We have a clear understanding of the challenge we face as a business. When I launched our strategy a year ago I said that the market was beginning to polarize between the premium retailers and the discounters – and the traditional players would be squeezed.”
“Asda has begun to step away from the big four and outperform its traditional competitors. We have more to do on the discounters – but we continue to close the gap on price and offer 10 times the range across stores and online.”
Sainsbury’s posts a loss and slashes prices
On Wednesday, Sainsbury’s registered a £290 million loss for the quarter ending Sept. 27. It also announced a £150 million investment to slash prices is it joins the other giants in a fight for survival against the discounters.
The UK’s third biggest retailer warned that profitability will decline further in the second half of the year, as will dividends.
Sainsbury’s 750,000 square feet expansion program has been reduced to 500,000 square feet.
Morrisons to start price-matching
Britain’s fourth-biggest supermarket chain Morrisons said sales fell 6.3% in the last quarter. The company announced it would start price matching the discounters in its attempt to stop losing market share.
In the quarter ending Nov. 2, the sales decline was less severe than the 7.1% and 7.6% slumps seen in the previous two quarters.
Morrison’s announced it had started to implement a 3-year restructuring program aimed at saving £1 billion. Earlier in 2014, the company said it would be cutting 2,600 jobs.
