Asda’s annual profits plunge

ANNUAL profits at Asda fell by nearly a fifth last year after it was left trailing by its “big four” supermarket rivals and rapidly growing Lidl and Aldi.

Britain’s third biggest grocer, which once boasted “saving you money every day”, admitted its performance in 2016 was “behind our expectations” as sales at stores open at least a year fell by 5.7 per cent, accelerating from the previous year’s 4.7 per cent decline, while pre-tax profit fell by 18.8 per cent to £791.7million.

Market share fell by 0.9 percentage points to 15.7 per cent during the year, according to Kantar Worldpanel.

Previous management had been committed to protecting profits and said they would not be distracted by “short-term gimmicks” to boost sales but it has been squeezed by the turnarounds at Tesco and Morrisons and the expansion of the German-owned chains.

Asda said: “The grocery market has continued to experience low growth throughout the year and competition in the sector has remained intense. Our sales performance, relative to the market, was behind our expectations.

“However, in the last quarter of 2016 we saw an improvement following the changes made to our ranges and investment in price and service.” A year ago, owner Walmart of the US brought in the head of its Chinese business, Sean Clarke, pictured, to lead its fightback and protect its market share.

Its underlying sales have continued to fall but the rate of decline has eased.

First-quarter sales were down 2.8 per cent, a slight improvement on the 2.9 per cent drop in the three months to December 31. Second-quarter figures due this month are expected to show the first positive underlying sales after 11 straight quarters of decline.

Improvements to its website and apps are driving online sales, while Kantar industry figures for the 12 weeks to July 16 show 398,000 new shoppers and sales up 1 per cent at stores open at least a year.

Clarke said he was pleased with the “continued momentum” and it was “delivering more consistently for our customers, particularly in fresh food, service and availability” but he was “in no way complacent” and there is “still much to do”.

Asda, which opened eight shops last year to make 645, has played down speculation of an acquisition after the Sainsbury’s takeover of Argos and Tesco’s proposal to wholesaler Booker.