Yahoo Finance Asda profits slip as price cuts help boost sales
Asda toasted a fourth consecutive quarter of sales growth today but revealed its profits had slipped in the run up to Christmas as it cut prices amid fierce competition in the grocery market.
The supermarket chain, owned by US giant Walmart, didn’t disclose its precise profit and revenue figures but said its gross profit margin and operating income declined due to “on-going price investments”.
The price cuts helped it grow sales by 2pc in the three months to December, or 0.5pc on a like-for-like basis, which excludes stores that have been open less than one year. That compares with steep falls of 0.6pc and 2.9pc in the same quarter last year.
Roger Burnley, who took over as Asda’s chief executive last month, said it attracted 348,000 new customers to its stores in December and was the only one of the big four supermarket chains - Asda, Morrisons, Sainsbury’s and Tesco, to maintain its market share in the period.
The four giants have been under siege from discount chains Aldi and Lidl, upmarket grocers including Waitrose and Marks & Spencer and convenience stores including the Co-operative Group in recent years.
But they bounced back in 2017 and all managed to grow sales over Christmas, in contrast to high street non-food retailers, many of whom have been hit by lower footfall owing to a boom in online shopping.
Clive Black, an analyst at Shore Capital, said given the UK’s 3pc inflation rate, Asda’s growth figures implied it was selling fewer products despite generating more revenues.
We know we have more work to do in the UK, however we are encouraged by recent results in key areas of our business.
Walmart chief executive Doug McMillon
Mr Black said the grocer was back on track after “several years going in demonstrably the right direction” but that it was “still having to work hard” to generate sales growth.
Walmart’s chief executive Doug McMillon said: “We know we have more work to do in the UK, however we are encouraged by recent results in key areas of our business.”
The US giant reported group sales of $136bn (£97bn), up 4pc on the prior year, but a 10.2pc drop in operating income to $4.5bn.
