Asda’s sales have increased for the fourth quarter in a row, but profits took a hit as the grocer sought to keep prices down amid the ongoing price war in the sector.
The Walmart-owned retailer, which is the subject of a proposed £12 billion mega-merger with Sainsbury’s, recorded a 3.4 per cent uptick in like-for-like sales in the three months to March 31.
Sales still grew one per cent on a like-for-like basis when the benefit of an early Easter is excluded, and the figures represent a year of positive sales growth.
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Asda said its sales were boosted by an 8.3 per cent rise in online grocery sales as well as a 21.9 per cent spike in sales at George.com.
However, the retailer’s gross profit fell year-on-year, which the company attributed to its investment in price reductions and the early Easter.
“During the first three months of the year, we have continued to invest sensibly where it matters most to our customers with lower prices, innovation in our own brand and further improving their shopping experience whether in store or online,” Asda chief executive Roger Burnley said.
“Whilst we are not complacent, we are positive about our growing momentum and excited by the opportunity that our proposed merger with Sainsbury’s offers to accelerate our successful strategy and go further, faster.”
The fourth consecutive quarter of sales growth will come as a relief to Walmart following a difficult few years for Asda, which has struggled to compete with its rivals.
In 2016 it was the worst performing Big 4 grocer, seeing sales drop 2.9 per cent in the last three months of the year.
Since then it has been in the midst of a turnaround to restore its fortunes, which included job cuts as part of a cost-cutting drive.
In January, it revealed that 28 head office roles would be slashed – in addition to the 300 job losses revealed in September – as part of a cost-cutting drive.
Asda is now preparing to merge with Sainsbury’s, subject to approval from the Competitions and Markets Authority (CMA), and although consumers have been promised cheaper everyday items as part of the deal – it is not yet known where the price cuts will fall.
Nonetheless, Sainsbury’s chief executive Mike Coupe has said the merger will produce £500 million in cost savings.
It is expected that scores of stores will have to be offloaded or shut down as part of the competition probe from the CMA.