Analysts Verdict Retail have said that UK retailer Asda is failing to "rise above the threat of the discounters" and needs to address its low-price proposition in order to win back market share.
Verdict Retail's Fiona Paton was commenting following Asda's posting of a 4.7% decline in revenue over its most recent financial year. However, the retailer also saw a rise in pre-tax profits (+5.2%).
"Although Asda blames much of its poor performance on deflation, this has impacted the entire grocery sector, and makes it an increasingly weak explanation for Asda’s recent performance," said Paton.
"The key reason behind Asda’s downfall is its inability to rise above the threat of the discounters. Historically, Asda has always traded upon low prices to attract customers, but the discounters have repeatedly undermined this USP and therefore left the retailer more exposed than its other Big Four rivals.
"Whilst discounters continue their rapid store expansion across the UK, Asda needs to acknowledge that they have become established competitors in the grocery sector and can no longer be regarded as a temporary threat from the recent recession.
"Asda’s investment in its Project Renewal scheme will be watched carefully to see if the retailer can boost footfall and improve sales performance."
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