Asda announces Q2 2014 financial results – continued sales growth ahead of the market

Asda announces Q2 2014 financial results – continued sales growth ahead of the market

Asda till
Britain’s second largest retailer has announced LfL* sales growth of 0.5% for the 10 weeks to 30th June 2014 – continuing to deliver on its strategy to redefine value retailing.
Clear and consistent EDLP pricing strategy driving performance – maintaining strong price gaps to rest of the Big 4
Grocery Home Shopping continues to grow with market share now 18.4%
Click & Collect continues to drive e-commerce growth with more than 20,000 customers per week
George is now the second largest clothing retailer by volume in the UK
On the day that Walmart releases its earnings for the second quarter of 2014 Asda has announced that in the ten weeks to 30th June the UK’s second largest retailer increased sales on a LfL basis at 0.5% (excluding petrol)*. In continuing challenging trading conditions, the retailer increased its market share year on year by 14bps.

Speaking at a briefing in London today Asda President and CEO Andy Clarke commented that the structural changes in the retail market continued to present tough challenges, but that he was pleased that Asda had been quick to recognise the structural changes taking place in the UK market and in November 2013 set out its five year strategy to redefine value retailing.

Andy Clarke said: “The last quarter has seen unprecedented change within the food retail sector, and whilst I do not underestimate the challenge currently presenting retailers, I am proud that our business identified and put plans in place to respond to these changes early. We have a clear five year strategy based on Everyday Low Prices and we continue to implement that strategy with agility and pace.

Speaking with Alex Russo, Asda’s Chief Financial Officer, who joined the business in January 2014, Andy Clarke provided an update on the retailer’s performance and delivery of its strategy over the second quarter of the year.

They explained that a key pillar of Asda’s strategy remains a continued investment of £1 billion in Everyday Low Prices (“EDLP”), which has been at the core of the business for decades. They commented that in today’s market EDLP increasingly appeals to ever savvier customers who are attracted to clear and simple pricing and this continues to pay dividends. Asda maintained a strong price gap to the rest of the Big 4 during the quarter and extended Price Lock to 160 lines.

In non-food, the George brand continues to perform well and is now the second largest clothing brand in the UK in terms of sales volume. Asda has continued to explore new ways to extend the brand in the past 12 months and the recently launched George Home range, which brings George’s quality and style credentials to Asda’s general merchandise business, has delivered double digit growth in the quarter

Clarke and Russo noted that Asda is making good progress on its ambition to ‘lead online’ and reported market share had increased to 18.4%. This growth continues to be driven by the expansion of Click and Collect, which now accounts for 10% of all online orders and is used by more than 20,000 Asda customers per week.

Asda anticipates that over the coming five years Click & Collect orders will treble with 30% of all orders expected to be collected in Asda stores. With this in mind, the retailer is continuing to innovate and develop its offer. In the last three months Asda has extended the hours customers are able to collect their shopping on a Sunday by four hours, driving a 20% uplift on the day’s orders.

Russo also noted that Asda has successfully driven efficiency improvements across the business during the quarter as part of its commitment to a low cost operating model with further reductions to energy and waste. By introducing LED lighting in 244 stores, the retailer has achieved a 45% reduction in energy usage per store.

Andy Clarke also spoke of activity within the quarter designed to further improve Asda’s operational efficiency, with changes to its management structure. He spoke of the retailer’s consultation on a new management structure, which has seen a shift in focus of management roles within the business. Clarke acknowledged that the decision to implement the changes was one of the ‘most difficult decisions of my career’ but stated that he was proud that the business had engaged in genuine consultation with colleagues, which has resulted in an additional 600 roles being added in to the new structure plans. Over 7000 Managers within stores are currently going through training for their new roles, which begin in October.

On growth and innovation in stores, Asda opened three new superstores and two supermarkets during the second quarter. Five new sites were also acquired from the Co-op, further strengthening the retailers small store portfolio. Quarter three will see three new openings for the retailer – with Barhead supermarket in Scotland opening this week. Clarke also confirmed that the retailer will continue to innovate its existing space, and in 2015 will roll out 86 remodels and 87 refurbishment projects across its supermarket estate. Asda will also continue to develop its large store offer – rolling out three new ‘format trials’ in stores over the next six months that will test new ideas and innovations for large stores that will inform plans for further development of the portfolio in 2016. Clarke said that he was ‘confident’ in the future of large store formats but that the space needs to be used innovatively and create new ‘reasons to visit’ for customers.

Andy Clarke concluded: “I am pleased with our performance in the quarter and our business has shown that it is well positioned to meet the demands of a challenging market. However, I’ve been in this business for too long to measure success by quarters and we remain on a long term journey. Innovation, low prices and customer service remain at the heart of our business and over the coming months and years we will continue to implement and build on this successful strategy as we constantly look at new and improved ways to run our business.”

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