May 20, 2020
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Asda gets Q1 sales boost, CEO expects resumption of stake sale talks when Walmart ready

May 20, 2020

British supermarket group Asda got a sales boost in the first quarter from consumers stocking up before the coronavirus lockdown but it also highlighted that 90% of its shoppers now fear an economic depression.

George at Asda

The company, whose attempt to combine with rival Sainsbury’s was blocked by the regulator last year, said on Tuesday its like-for-like sales, excluding petrol, increased 3.5% in the quarter to March 31, having fallen 1.3% in the previous quarter.

Asda, owned by the world’s biggest retailer Walmart, said growth in food was partially offset by weaker demand for clothing and it also faced incremental costs related to the pandemic, such as for 22,000 temporary workers, staff bonuses and safety equipment.

The group’s gross profit rate and its operating income both decreased in the period.
CEO Roger Burnley said customers had moved on from initial worries about the virus to more longer term concerns about the implications of the lockdown on their family’s wellbeing and finances.

“Our latest income tracker data shows that household incomes declined 0.6% in March, the first drop since 2017 and 90% of customers told us they are worried about a depression in the economy,” he said.

A depression is a severe and prolonged economic slump that self-perpetuates as households and companies cut spending causing more damage to the economy.

Asda is the last of Britain’s big four grocers to report on the first quarter.

Market leader Tesco has estimated a costs hit from the crisis of up to 925 million pounds ($1.13 billion), while Sainsbury’s warned the profit impact could be more than 500 million pounds. The fourth biggest player Morrisons has estimated additional costs of about 230 million pounds.

After the failure of the Sainsbury’s deal, Walmart said it was considering a stock market listing for Asda. In February Walmart said it was in talks with possible buyers of a majority stake in the group.

On Tuesday, the boss of Asda said talks between Walmart and possible buyers of a majority stake in its British supermarket Asda will likely resume when the industry settles into a “new norm” with the worst of the coronavirus crisis behind it.

Last month Walmart, the world’s biggest retailer, put talks on the possible sale of a big stake in Asda on hold so management could focus on dealing with the impact of the pandemic.

“There’s every possibility they will resume at a point in time but only when Walmart feel that is right,” Burnley told Reuters.

“There’s no reason for that not to come back on the table at the appropriate time when it feels like...we have a new norm and we’re able to embrace that,” he said, adding: “I don’t think at all that interest would have waned.”

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