Asda launches new price cuts after sales slow further in fourth quarter

Asda boss Andy Clarke claimed the supermarket was "not in crisis" despite sales worsening in the fourth quarter and market share shrinking.

Like-for-like sales fell 5.8% in the 13 weeks to 1 January, an acceleration on the 4.5% decline in the third quarter and dragging full-year LFL sales down 4.7%.

Analysts said this was much worse than expected.

Recent data from Kantar Worldpanel showed Asda was one of the worst performers over the festive period but with only a 3.6% fall in sales year-on-year, though market share continued to decline to 16.2%, having lost its second place position to Sainsbury's last summer.

Speaking on Thursday as parent company Wal-Mart released its results, Clarke admitted 2015 was a difficult year as the UK retail market continued to undergo "significant and permanent structural change", with fierce competition in the sector.

"In that context, our results for the year have been commendably stable, balancing investment in our customers with disciplined financial management in a period when many of our competitors have suffered severe falls in profitability.

"We have steered a careful course through this very turbulent period for the industry and through a complex set of challenge."

Clarke, who last month confirmed staff consultations were beginning ahead of what could be hundreds of job cuts, said a new price investment campaign called 'Pocket More' had launched this week, to cut Asda's prices below Tesco, Sainsbury’s and Morrisons on a further 1,600 lines.

Reports from the Grocer magazine on Wednesday suggested Asda was asking suppliers for significant discounts and cash contributions to help it slash prices.

'Pocket More' forms part of Asda's Project Renewal, which launched in October with a £500m price investment commitment added to the £1bn committed in last year's five-year plan.

Clarke also formally revealed a pilot and 'strategic partnership' with French sports retailer Decathlon would be extended as Asda targets better use of store space, akin to Sainsbury's trials with Argos concessions.

Improvements were delivered across 35% of the store estate, with 95 of the largest stores in the estate modernised.

As well as competition from the rise of discounters Aldi and Lidl, Asda's positioning as a low-price retailer also faces competition from new entrants such as Sir Stelios Haji-Ioannou's easyFoodstore.

Analysts at Shore Capital said the LFL sales result was "much worse than we anticipated" and would clearly be a disappointment for Clarke, who they feel of the Big Four superstore players was first to call and adjust to the challenges of the LADs but has suffered from a poaching of his best staff by the US parent.

"Asda needs a more robust and consistent proposition to our minds," wrote analysts Clive Black and Darren Shirley. "If any of the superstore groups needs to be fighting the fight against the LADs then it has to be Asda, not least because it appears to be the current chief victim of their advance."

The Pocket More campaign is seen as somewhat deficient, by the pair, as the prices reference the other big superstore players and not the LADs.

"Asda is losing out to Aldi and Lidl and ‘Pocket More’ will do little, to our minds, to convince shoppers to change their behaviour... More to the point, shoppers understand such matters as are more battle hardened, surely Asda must recognised that they are not so gullible?"