UK’s No.2 supermarket reports 1.6% step back in sales, in 13 weeks to 30th September 2014.
CEO and President Andy Clarke states he is ‘pleased with Asda’s performance in a distressed market’ and notes ‘vouchers may win quarters, but strategies win decades’.
Asda continues to close price gap with discounters, driving Everyday Low Prices through relationship with its subsidiary International Procurement Limited (IPL), which has delivered £190m savings to Asda in five years.
On the day Walmart announced its financial performance for the third quarter 2014 (13 weeks to 30th September), the UK’s second largest supermarket Asda has announced a 1.6% step back in LfL sales for the period but has grown market share for the second consecutive quarter.
Speaking at a briefing in London, Asda CEO and President Andy Clarke stated that although no Chief Executive wants to report a negative comp, he is pleased that in a distressed market for all major retailers, Asda is outperforming its traditional competitors and gaining market share.
Whilst Asda’s performance in the third quarter was a step back from a 0.6% LfL growth in the second quarter of the year, it was noted that the retail market as a whole has slowed significantly in the third quarter. Asda remains the only one of the traditional supermarkets to have grown market share in the period (up 9bps to 17.3%).
Clarke noted that Asda took early action to address the changes within the retail market 12 months ago – implementing a five year strategy to Redefine Value Retailing - that focusses around delivering a market leading value proposition, driving efficiency within the business operation, as well as leading online and delivering physical formats for the future.
He said that Asda had continued to deliver this strategy with agility and pace – reporting a 19.6% growth in online shopping – the supermarket’s 10th consecutive month of above market growth and the launch of two ‘format’ large store trials in Coventry and Grantham.
Asda also continues to drive efficiency and market leading value through its commitment to Everyday Low Pricing and sourcing relationships with International Procurement Limited (IPL).
IPL is a wholly owned subsidiary of Asda, sourcing products for Asda customers ranging from produce to cooked meats and wine. The IPL model focusses on developing direct relationships with producers, by removing unnecessary process from the supply chain. Since Asda acquired IPL in 2009, the IPL business has grown eight fold and delivered £190 million savings.
The specialist sourcing body is also helping drive quality for Asda customers. Speaking at the Q3 update today, Asda’s Chief Merchandising Officer for Food, Barry Williams, revealed that since 2012 independent researchers from Cambridge research have conducted blind taste tests on a range of fresh produce items that customers buy every week from a range of supermarkets including traditional, premium and discounters.
Asda produce has consistently been rated highly by consumers and in the last quarter scored top, with 39 out of a possible 50 points. By dealing directly with producers, IPL is able to remove unnecessary costs and waste within the supply chain. By shortening ‘field to fork’ times IPL has been able to give 1400 days of shelf life back to customers in 2014.
Andy Clarke said; “A year ago we took clear action to address the changes in our market and implement a five year strategy to redefine value retailing. That is a long term strategy that won’t be delivered overnight, but our early, decisive action has seen our business outperform our traditional competitors in a market that is in unprecedented distress.
“We have a clear understanding of the challenge we face as a business. When I launched our strategy a year ago I said that the market was beginning to polarise between the premium retailers and the discounters – and the traditional players would be squeezed. Asda has begun to step away from the ‘Big Four’ and outperform its traditional competitors. We have more to do on the discounters – but we continue to close the gap on price and offer ten times the range across stores and online.”
Referencing the increase in offers and gimmicks launched in the last quarter, Clarke was firm in his commitment to Asda’s longstanding Everyday Low Price strategy. He concluded; “The last quarter has seen a shockwave go through our industry and others are starting to respond to the challenges they face. I expect that we will see another tough quarter and I’m under no illusions that the battle continues to rage.
“A new reality is upon us and although we were the first to adapt, we need to do everything to remain ahead of our traditional competitors whilst removing reasons for customers to go to the small discount shops. That’s the strategy we are on and we need to keep accelerating it.
“We won’t be knee jerked into reacting to short term tactics. Vouchers can win quarters, but strategies win decades.”