Asda blames 'cautious' customers and difficult Christmas for fall in sales
The supermarket was affected by a challenging market, particularly in clothing, but was helped by its performance in food.
Tuesday 18 February 2020 14:54, UK
Asda has reported a fall in underlying sales during its Christmas quarter, blaming "cautious" customers and a difficult trading environment.
The British supermarket arm of US firm Walmart said comparable sales fell by 1.3% during the fourth quarter, compared to a third quarter fall of 0.5%.
It said it was "impacted by challenging market conditions, particularly in clothing" but was boosted by a more stable performance from its core food business.
Online sales were strong, however, with home delivery revenues increasing 10.3% compared with the same quarter in the previous year.
Asda chief executive and president Roger Burnley said: "We know that our customers' mindsets during the quarter were cautious and while customers were enthusiastic for Christmas, they were more mindful in their spending - with many choosing to pare back gift lists and focus presents on kids rather than adults and extended family.
"Our monthly income tracker showed that while disposable income remained stable at around £217 a week during fourth quarter, previously seen trends of growth are starting to slow and consumers remain highly budget conscious."
Thomas Brereton, retail analyst at GlobalData, said that while Asda had "used almost identical excuses" for its struggles, it appeared to have been hit "worse than its competitors".
He added: "While Q4 in isolation shows ASDA in a dim light - emphasised by the lack of usual detail of net sales growth, and no explicit mention of UK operations in Walmart's earnings release - 2019 as a whole was rather encouraging for ASDA, spending much of the year battling with Tesco to be the best performer of the 'big four'.
"This should provide confidence in ASDA's ability as a standalone retailer as it looks to spin off from Walmart and IPO [initial public offering] in 2021-22, and should continue to focus investment in its resilient online division, which grew sales 10.3% year-on-year, well ahead of the 7.1% total online retail growth for 2019.''
The big four supermarkets - Tesco, Asda, Morrisons and Sainsbury's - have all been struggling with shrinking market share as shoppers opt for discounting rivals Aldi and Lidl.
Asda and rival Sainsbury's sought to meet the competition by agreeing a multibillion-pound merger, but the move collapsed after it was blocked by the Competition and Markets Authority in April last year.
Also last year, the chief executive of Walmart said it was "seriously considering" a flotation of the UK arm of the business but said such an undertaking would take "years" to organise.
Asda, Britain's third biggest supermarket by sales, is the only one of the big four not to have a UK stock market listing.