Asda warns of material hit to profit this year
Asda has announced that it is to continue cutting prices and putting more staff on the shop floor as it reported that total revenue fell by 0.8% to £21.7 billion in the year to 31 December.
During the period, like-for-like sales excluding fuel were also lower year-on-year, declining by 3.4%.
The supermarket grew its adjusted EBITDA after rent by 5.8% to £1.14 billion as a result of improved gross margins, particularly in non-food due to the strength of its George business. It also benefited from the performance of its 356 Asda Express convenience stores and forecourt sites acquired from EG Group.
Asda said the investment in value for customers would affect profitability in the current financial year.
Never Miss a Retail Update!Commenting on the performance, Allan Leighton, Asda’s executive chairman, said: “Everyone is focused on making Asda the number one choice again for busy hard-working families who demand value. This is what’s driving all of our actions across pricing, ranging, merchandising and every part of the business.
“Following the return of Rollback in January, our price advantage has strengthened and customers’ perceptions of the value we offer is starting to improve. We will move thousands more products to Rollback at regular intervals this year.
“Looking ahead we still have plenty of work to get our business firing on all cylinders again. While regaining customers’ trust will take time, we will undertake a substantive and well backed programme of investment in price, availability and the shopping experience to deliver this. This will materially reduce our profitability this year, which we expect to reverse as our market share recovers and improves over time.”
Since the year end, Asda has stepped up its investment in value by bringing back Rollback to Asda Price proposition. Launched at the end of January with an average reduction of 25% across 4,000 popular products, it has since been been expanded to roughly a quarter of Asda’s range.
The supermarket will add thousands more products to Rollback at regular intervals during the year as part of a shift to move its entire product range to a new low ‘Asda Price’ by the end of 2026.
During the second half of 2024, Asda invested £43 million in store hours with a focus on replenishment and improving store standards.
Michael Gleeson, Asda’s chief financial officer, said: “We have a clear plan to reset our value offering and meet the demands of our current and future customers – as proven by our improving satisfaction scores.
“While it is encouraging that our market share performance is stabilising, we know what we need to do to regain our sector leading value position, and we are executing against this.
“Asda is a highly cash generative business and our strategy is backed by a robust balance sheet as we continue to make progress on our deleveraging commitments, having pushed all of our near-term debt maturities into the next decade.”
