ASDA, the second largest food retailer in the UK, announced plans on spending £600m to expand its presence in the UK – through opening new stores and improving existing ones – after it posted a decline in quarterly sales.
The Wal-Mart owned chain has been one of the most stable over the past couple of years and has been effortlessly trying to put up against fierce competition from German discounters Lidl and Aldi.
In the 12 weeks to the beginning of January ASDA reported a 2.6% drop in like-for-like sales. The retailer posted an overall decline of 1% in 2014.
The chain said the caused of the decline was due to a “structural shift” in a market which is in “one of its most challenging and changeable periods in history”, according ASDA’s chief executive Andy Clarke.
Clarke has criticsed the “short-term gimmicks” of its rivals.
“There’s no doubt that the fourth quarter drove a higher level of distress in the market with a significant amount of vouchering and promotional activity, I would say unsustainable medium-term activity,” he said.
ASDA is not the only retailer in the UK to struggle in maintaining its market share. Tesco’s like-for-like sales fell 2.4% in the six weeks to the beginning of January, Sainsbury’s sales declined 1.7% in the 14 weeks to 3 January and Morrisons’ sales dropped 3.1% in the six weeks to 4 January.
Last year ASDA opened 17 new stores and slashed prices to try and win some ground in a market that discount retailers are eating into.
It said it would be opening 17 stores this year, in addition to 36 petrol stations and 150 Click and Collect sites.