Asda Faces Sales Slump Amid Internal Challenges and External Criticism
Britain's third-largest supermarket chain, Asda, has reported a significant decline in performance while launching a stinging critique of the government's approach to business. The retailer saw total sales fall by 3.8% to £5.1 billion during the three months ending September, representing a sharp reversal from the 0.2% growth achieved in the previous quarter.
Self-Inflicted Technology Problems
Chairman Allan Leighton, who returned to lead the business last year for a second revival attempt, described the sales and market share decline as "totally self-inflicted". The supermarket struggled with substantial technology problems resulting from the lengthy process of separating its IT systems from former owner Walmart.
These technical issues caused significant availability problems across stores, with gaps appearing on shelves that directly impacted customer shopping experiences. The problems extended beyond groceries, affecting clothing and homewares supplied to more than a quarter of Asda's stores through a specialist distribution centre.
Leighton admitted that a new grocery home shopping app had proven "more clunky than what we had before", which deterred customers from using the service. He estimated these self-inflicted problems had set his turnaround plans back by approximately six months.
Government Under Fire for 'Killing Confidence'
Beyond internal challenges, Asda's chairman delivered a blunt assessment of the government's role in the current economic climate. Leighton stated that "the country is stuck in reverse" and accused ministers of hampering business investment through additional costs.
He emphasised that retailers need "a positive consumer" to drive sales growth, but claimed the government was "killing consumer confidence because of the fact there is no growth and nobody is investing". The supermarket boss added that "the government isn't doing anything to stimulate growth", creating a challenging environment for all retailers.
However, Leighton noted that feared business rates changes for large retailers in the recent budget would have a "neutral" impact on Asda specifically.
Competitive Pressure and Future Strategy
The sales decline comes at a critical time for Asda, which has seen its performance deteriorate since the £6.8 billion debt-fuelled takeover in early 2021 by the Issa brothers and private equity firm TDR Capital. Analysts at Worldpanel by Numerator suggest discount rival Aldi is now poised to overtake Asda as Britain's third-largest supermarket.
Despite the challenges, Leighton expressed confidence that the worst of the IT problems are now behind the business, stating "it's all behind us now" and that availability has returned to appropriate levels. The retailer plans to continue its strategy of price cuts, claiming Asda is now between 4% and 7% cheaper than major competitors like Tesco and Morrisons.
Leighton noted that competitors "didn't double down on price" in response to Asda's well-publicised investments in keeping prices low for shoppers, providing the supermarket with a potential competitive advantage as it seeks to recover from this difficult period.
