‘Alarming’ Asda results
“Alarming” first quarter Asda results follow an eventful 2015 where Asda posted like-for-like falls for four consecutive quarters and finished the year with 4.7 per cent decline over 2014.
CEO Andy Clarke called Asda’s 4.7 per cent fall in its second quarter last year as the retailer’s nadir. But its performance has worsened even further with a 5.7 per cent slump in its first quarter.
Asda continues to blame declines in traffic and food volume on the competitive UK food & grocery market while claiming that its recent investments in price and product availability were not enough to overcome the adverse market forces to boost sales in its large format stores. While Asda is certainly on the right track with its Every Day Low Price strategy and recent price investments aiming to close the gap with discounters, it has not done enough to broaden its appeal beyond price.
Its Project Renewal remains critical to its turnaround efforts as Asda strives to strengthen its customer offer in order to drive shoppers through the door of its rather functional supermarkets. A brand refresh would help the grocer achieve this with the planned modernisation of 95 large stores, in-store service improvements and effective marketing of its more premium Extra Special label. Moreover, similar to its Decathlon tie-up, Asda should tap into its partnerships to maximise use of space and turn its large store formats into real shopping destinations.
While Asda has traditionally attributed his suffering market position among the Big Four to the short-term tactics of its competitors, this is no longer the case with the focus shifting to value rather than price.
Asda needs to achieve the right balance of price, quality and service if it wants to “better address the fast-changing needs of its customers”.
- Duygu Hardman is an analyst with Verdict Retail.