Asda, Britain's third biggest supermarket group, posted a 5.3% decline in underlying sales in the three months to the end of June, as it continues to underperform its rivals.
The group, which is majority owned by Mohsin Issa and private equity firm TDR Capital, said total revenues excluding fuel fell by 2.2% to £5.3 billion ($6.74 billion).
Asda is struggling to keep up with industry leader Tesco and No. 2 Sainsbury's, which analysts have blamed on Asda's ability to compete being hampered by its high debt levels.
Asda said its net debt at the end of June was £3.9 billion and it remained committed to further de-leveraging.
It said it would invest in core grocery lines, improving efficiencies, adding more staff hours to ensure shelves were replenished faster, and growing its customer loyalty programme to drive a return to growth.
Taken Its Eye Off Core Product Offer: Analyst
Sofie Willmott, associate retail director at GlobalData, stated, “Asda is focused on major technology improvements across the board covering customer-facing areas like self-checkouts and scan and go devices, as well as back-end processes within its distribution centres and in its payroll software.
“No doubt this will bring benefits and cost savings in the long term but while it has taken its eye off its core product offer, distracted by these projects as well as buying EG group and a number of Co-op stores, its competitors have been laser-focused on food at a time when consumers have been extremely budget-conscious and willing to switch.
Quarterly Highlights
The retailer's online grocery sales – which now account for 18% of its total food revenue – increased 1.4% year on year in the second quarter.
In this period, the company completed the conversion of 478 convenience sites acquired from the Co-op and EG UK to the Asda Express format.
Moreover, it is set to open 11 Asda Express convenience stores by the end of the year.
Michael Gleeson, chief financial officer at Asda, stated, “We have made great progress over the last few years in transforming Asda into a diversified retail group, much of which is almost complete. However, we also know that there are some areas where we can and need to improve.
“We have set out clear and decisive action to deliver a more consistent customer experience – to match the uncompromising value we offer. We remain confident in the underlying strength of the Asda business as we execute our long-term growth strategy.”
News by Reuters, additional reporting by ESM.
