Price-cutting strategy pays off for Asda
The UK’s second biggest supermarket chain Asda today said its price-cutting strategy had paid off in the face of a slowdown in consumer spending.
The Leeds-based group warned growth was slowing generally, but said its own customer numbers increased as it maintained its focus on price in the face of five increases in interest rates.
It added like-for-like sales were still up “in the mid single digits” in the three months to the end of July, while profits were ahead of its expectations.
The news from Asda mirrored recent updates from Sainsbury’s and Tesco after both saw sales growth slow amid a more competitive and challenging trading environment, especially for non-food.
Additionally, all three supermarkets have faced tougher comparatives from the previous year when the World Cup boosted sales, while the wet weather in June and July has also impacted sales.
Asda is owned by US giant Wal-Mart, which warned today that profits would not meet initial expectations after customers cut their spending because of increased economic pressures. Sales grew by 8.8% to $91.99bn (€68bn) during the period. Asda sales make up 10% of its overall sales figures.
Asda has been engaged in a price war with Tesco as the chains battle to win over customers in the tougher economic environment.
Market research group TNS recently said the grocery market grew at its slowest rate for more than a year in the 12 weeks to July 15, however Asda, Sainsbury’s and Tesco all outperformed with sales up by 5% in the period.
Asda grew its market share to 16.7%, up from 16.6% in the previous month, compared to Tesco’s 31.5% share and Sainsbury’s 16.2% slice of the market.
Asda opened three new stores during the quarter while it also launched its first eco-store in Oldham at the start of August. The Oldham site has a 15% lower carbon footprint over other stores.
Asda chief executive Andy Bond said: “Our strategy of lowering prices and improving the shopping experience for our customers is continuing to pay off.
“Despite a tougher economic environment and poor weather earlier in the summer, we are growing our market share and attracting even more customers.”
