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Published
May 19, 2016
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Sales at UK supermarket Asda continue to slide

By
Reuters
Published
May 19, 2016

Supermarket chain Asda, the British arm of Wal-Mart, reported a seventh straight quarter of declining underlying sales on Thursday, blaming brutal competition in the UK market.



Asda said sales at stores open over a year fell 5.7 percent in the 13 weeks to March 30, its fiscal first quarter.

That represents virtually no improvement from a slump of 5.8 percent in the fourth quarter of Asda's 2015 financial year, the firm's worst ever quarter.

Asda is the laggard in sales terms among Britain's traditional big four supermarkets, also including market leader Tesco (TSCO.L), Sainsbury's (SBRY.L) and Morrisons (MRW.L).

The sales decline reflects industry deflation as the grocers cut prices to counter the rise of German discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL].

Asda is Britain's most profitable grocer however as, unlike rivals, it has opted to protect profit margins.

While its listed British rivals have all reported profit declines and asset write-offs, Asda has maintained yearly profit at about 1 billion pounds ($1.46 billion).

“The UK continues to struggle, due primarily to fierce competition," said Wal-Mart’s Chief Financial Officer Brett Biggs.

"Improvements in price and product availability throughout the quarter were not enough to overcome traffic and food volume declines in our large format stores."

Asda Chief Executive Andy Clarke prematurely called last year's second quarter the firm's "nadir" when underlying sales fell 4.7 percent.

Clarke is attempting to recoup sales by cutting prices to narrow the gap with the discounters and widen its price advantage over its three biggest rivals.

It is also in the middle of a program to overhaul its product range, modernize its 95 largest stores and reduce costs.

However, monthly industry data shows it has continued to lose market share. Its share of the British grocery market stands at 16 percent, down 0.9 percentage points year-on-year, according to market researcher Kantar Worldpanel.

Analysts question the sustainability of the Wal-Mart driven strategy, saying Asda is losing ground to rivals on non-price factors such as product merchandising and quality. They say its stores need investment.
 

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