Asda bags a year of growing sales, but price cuts hit profits
The Walmart-owned supermarket is readying itself for a merger with Sainsbury’s.
Asda has seen sales rise for the fourth consecutive quarter, but the supermarket took a hit on profits as it continues to bring down prices in an effort to stay competitive.
The Walmart-owned supermarket, which is readying itself for a mega-merger with rival Sainsbury’s, booked a 3.4% increase in like-for-like sales in the three months to March 31.
Taking out the benefit of an early Easter, sales grew 1% on a like-for-like basis, but the figures represent a year of positive sales growth.
Asda’s gross profit fell year-on-year, which the company attributed to its investment in price reductions and an early Easter forcing the firm to change its sales mix.
Asda boss Roger Burnley said: “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.
“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.”
Online grocery sales were up 8.3% in the quarter, with sales from George.com jumping by 21.9%.
Asda has been leading a turnaround in an attempt to improve sales amid a long-running supermarket price war.
It is on course to merge with Sainsbury’s in a £12 billion deal, which will allow it to further invest in lower prices. Sainsbury’s boss Mike Coupe has said the merger will produce £500 million in cost savings.
Consumers have been promised cheaper everyday items, although it is not yet known where the price cuts will fall.
The Competition and Markets Authority is scrutinising the deal and it is expected that scores of stores will have to be offloaded as part of the competition review.
Asda has also been axing jobs in the UK, announcing in January that 28 roles will go at its head office on top of 300 job losses revealed in September as part of a major cost-cutting drive.