Asda’s woes continue amid latest sales results
18 August 2016
Asda has published its latest quarterly results, showing a 7.5% drop in sales – the company’s worst-ever quarterly performance. CEO of Asda’s parent company Doug McMillon cited the latest slump as down to deflation and “the competitive environment.
“Our strategy to turn things around is focused on improving the retail basics,” said McMillon. “While our turnaround will take time, I’m confident the new leadership team at Asda will want to assure customers we’re addressing this with urgency.”
Asda’s CEO Sean Clarke took the post earlier this year when former chief executive Andy Clarke stepped down. Prior to this, Clarke in January enacted a price-cutting campaign worth £1.5bn that would be active until 2018; the same month, the company announced plans to shed hundreds of jobs at its headquarters in Leeds.
Analysing Asda’s woe, Davod Cheetham of XTB.com cited the “twin threats of deflation and increased competition” as part of Asda’s problem.
“Traditional supermarkets have struggled over the past couple of years as new entrants such as Aldi and Lidl have eaten into their market share,” said Cheetham. “A back-to-basics approach involving the streamlining of the business has been chosen as the path back to former glories.
“After the replacement of CEO Andy Clarke,” he said, “it appears more may be required to alter the firm’s current trajectory and win customers back.”
Meanwhile, Alastair Lockheart, insight director at Savvy, explored the issues now facing Sean Clarke following the latest disappointing figures.
“Mr. Clarke has many issues to consider,” Lockheart said, “from what to do with excess space to improving quality perceptions, but top of the agenda has to be re-establishing a clear pricing and value strategy.
“Over the past few years, discounters have have caused Asda’s price halo to slip. Granted, efforts have been made to cut prices, but it will be very difficult for the retailer to compete head-to-head on prices.
“Instead, Asda will need to pull on the quality lever, giving consumers clear reasons to pay that little bit more. But when you have 40,000 SKUs and vast stores to fill, tangible quality improvements cannot be made on the cheap.”