Walmart-owned Asda has posted a 1.1% decline in like-for-like sales in the first quarter of its financial year.
Commenting on its performance, Brett Briggs, Walmart chief financial officer, said, "We’re focused on continuing to execute the strategy to strengthen Asda’s long-term success, including the potential of an IPO at some point in the future. We’ll be thoughtful and measured in our approach."
Here's how leading retail analysts viewed its performance:
Thomas Brereton, GlobalData
"Asda's slightly underwhelming Christmas performance continued into the first three months of 2019 with a l-f-l sales decline and underperformed both Morrisons and Tesco over a comparable period; however (with the Easter adjustment) it has maintained its positive l-f-l streak of eight consecutive periods, and succeeded in still outperforming Sainsbury’s (l-f-l sales of -0.9%).
"Asda has highlighted that it has continued to increase price investment while removing 6,500 tonnes of plastic across own-brand ranges, but avoided discussing its controversial new concept of streamlining six contract types into one that will leave an estimated 3,000 staff worse off.
"It is clear that ASDA’s parent company Walmart is trying to reduce its commitments to a difficult UK market, refocusing on fending off Amazon in the US – through launching free next delivery to 75% of US population by year’s end – and investing in higher growth geographies such as India.''
Clive Black, Shore Capital
"With Asda's proposed merger with Sainsbury prohibited, both parties have had to engage in the task of refocusing their businesses to a new reality. Sainsbury and Asda have quickly put their engagement behind them and re-commenced that refocusing process, the latter seeking to do so with a group meeting at its Leeds 'home office'. Sainsbury will spend the summer thinking about what 'new' it may say on its strategic direction and the mechanisms to do so through a September Capital Markets Day.
"Whilst so, self-improvement and deleveraging appear to be necessary priorities. In essence though it is more of the same, albeit both parties in seeking to merge have exposed to all what they consider to be key competitive weaknesses."
Barclays European Food Retail Equity Research
"This is the weakest performance since 2Q17. The -1.1% LFL was driven by a +0.5% increase in transactions and a -1.6% decrease in ticket (i.e. deflation). However, “online grocery sales were strong with a 10% increase”, said Walmart CFO Brett Biggs. George.com saw double-digit growth during the quarter.
"The company also said Asda’s gross margin declined as a result of increased fuel sales with lower margins. In addition, operating expenses deleveraged as planned, primarily due to cost inflation, omnichannel expansion and costs associated with the proposed merger with Sainsbury. Operating income declined, also as planned, as a result of the decline in gross profit margin and expense deleverage."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
