Yahoo Finance Asda hit by fresh sales slump in battle with rivals
Asda has been hit by a fresh slump in sales as the heavily indebted supermarket chain struggles to boost demand in stores.
Shoppers have cut their spending at Asda in recent weeks, with sales down by 2pc in the 12 weeks to May 12, new Kantar figures show. It follows a 0.4pc decline in the prior 12-week period.
The figures also revealed that overall food price inflation has fallen to its lowest level since October 2021, in a further sign prices are coming under control as the Bank of England seeks to cut interest rates.
The decline at Asda makes it the worst performing supermarket and means the gap with larger rivals Tesco and Sainsbury’s has widened.
Asda holds a 13.1pc share of the grocery market compared to 13.9pc a year earlier. It had a 14.8pc share in early 2021.
Tesco and Sainsbury’s hold 27.6pc of the market and 15.1pc of the market respectively. They both grew sales at 5.6pc in the latest 12-week period.
The figures will add to growing concerns around the pressures on Asda, which has been lumbering under a heavy debt pile since the Issa brothers and TDR bought the business for £6.8bn in 2021.
It revealed last month that its finance costs jumped to £225m in 2023 from £185m a year earlier after it was struck by surging interest rates. Its debt pile stood at £3.8bn at the end of last year. It refinanced some of its debt earlier this month.
MPs have raised concerns over whether the structure of the business is making it less competitive.
Last year, Darren Jones, then-chair of the Business Select Committee, wrote to Asda’s co-owner Mohsin Issa asking whether its “complex company structure [may] restrict your ability to help meet cost of living pressures on your customers”.
Asda has embarked on a major cost-cutting push over the past 18 months. This included reducing working hours for tens of thousands of staff.
The Kantar figures, showing shoppers were spending less in Asda stores, came despite grocery prices continuing to rise.
The data showed food price inflation stood at 2.4pc in the four weeks to May 12. However, this marked the slowest increase since October 2021.
Kantar’s Fraser McKevitt said: “Grocery price inflation is gradually returning to what we would consider more normal levels.
“Typically, an inflation rate of around 3pc is when we start to see marked changes in consumers’ behaviour, with shoppers trading down to cheaper items when the rate goes above this line and vice versa when the rate drops.”
However, he said it could take longer for shoppers to revert back to their old habits after nearly two and a half years of spiralling costs.
An Asda spokesman said: “We are confident in our long-term strategy of investing to grow, which we have been doing throughout the year and will continue to do so. Recent investments include £70m to lower prices on more than 100 core everyday products by an average of 11pc and a £50m programme to update more than 170 stores – both of which launched earlier this month.”
