UK retailer Asda reports a 3.8% decline in total sales

UK – Asda, the UK’s third-largest supermarket, has reported a 3.8% fall in total sales to US$6.3 billion in the three months ending September compared with the same period last year.

Comparable store sales also dropped 2.8%, reversing the modest 0.2% growth recorded in the previous quarter.

The company pointed to ongoing IT challenges related to separating its systems from former owner Walmart as a major factor behind the decline.

Chair Allan Leighton, who returned last year to steer a second turnaround, described the drop in sales and market share as entirely “self-inflicted,” delaying his recovery plans by roughly six months.

At the same time, Leighton criticised the government, saying its policies were reducing consumer confidence and restricting business investment.

He argued that without a positive consumer outlook, retailers face difficulties increasing sales and that the country’s economic stagnation was affecting spending.

Leighton added that the government was failing to implement measures that would encourage growth, describing its approach as a barrier to investment.

The impact of proposed business rates changes for large retailers in the recent budget was expected to be neutral for Asda, according to Leighton.

Recent official data showed an unexpected drop in UK retail sales last month, as shoppers delayed purchases for Black Friday promotions while uncertainty over the budget affected spending.

Asda’s sales and profits have struggled since its US$8.4 billion debt-fuelled acquisition in 2021 by the Issa brothers and private equity firm TDR Capital, with Aldi set to overtake it as the third-largest UK supermarket, analysts say.

Problems with the retailer’s new IT systems caused availability issues, particularly affecting clothing and homeware supplies in over a quarter of stores, while a redesigned grocery home shopping app failed to meet customer expectations.

Leighton said the company had resolved the IT problems, and product availability had returned to satisfactory levels, indicating that the disruption was behind them.

Asda intends to maintain its strategy of price reductions, claiming that competitors have not matched its efforts to keep prices low for shoppers.

The company stated that its price position has improved, estimating it to be between 4% and 7% cheaper than other major supermarkets including Tesco and Morrisons.

Leighton expressed confidence in the retailer’s approach going forward, suggesting that Asda was prepared to continue competing through pricing and operational improvements.

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