Asda hungover after barbecue bounce

AsdaAsda suffered a hangover from last month's barbecue bounce as sales fell flat following a buoyant July.

The WalMart-owned supermarket giant also disclosed that sales growth in the second quarter of the year slowed as it paid the price for keeping a lid on price inflation in its stores as consumers continued to struggle in the downturn.
%VIRTUAL-SkimlinksPromo%Asda enjoyed a bounce last month from sales of burgers and sausages as people fired up their barbecues, as well as soft drinks, beers and summer dresses, amid a weather-related spike across the retail sector.

But finance director Richard Mayfield said performance at the tills had tailed off at the start of August as consumers tightened their belts following the summer feel-good splurge buoyed by sunshine, sporting success and the royal baby.

"August has been very, very flat for the whole market. The last two weeks have been very weak. People spent more than they expected to in July," Mr Mayfield said.

But the bounce came too late for second quarter figures released today that showed like-for-like sales growth slowed to 0.7% after a rise of 1.3% in the first three months of the year. Half-year performance was up 0.9%.

Market share has also shrunk to 17%, down 0.3% from the same period last year. Asda said it was paying the price for keeping a lid on inflation for its customers when rivals had not.

Chief executive Andy Clarke said that with gross domestic product still more than 3% below its pre-crisis peak, the economy was "bumping around the bottom" a fact experienced by the store's core customers.

"That continues to reflect how mum feels about how much money she has to spend on her week's shopping," he said.

"We think our approach is the right one for customers with squeezed disposable incomes. Our strategy is working - volume growth in a tough market."

Asda said sales volumes continued to grow in the midst of a declining market and that while revenues had suffered as it kept prices down, operating profits were up 7.5% as costs were shaved.

The big four supermarkets - also including Tesco, Sainsbury's and Morrisons - have been fighting over a shrinking market as top-end grocers such as Waitrose and budget retailers Aldi and Lidl gnaw at either side of the customer base.

Asda, which positions itself as offering consistently low prices, said it was well-positioned for the long term as volumes went up and it shunned "gimmicks" including price-match guarantees used by rivals.

The supermarket said it had been spending an extra £100 million a year keeping price inflation down to around 1% while it ran at 3.9% for the sector.

Despite the focus on price, Mr Mayfield brushed off the threat from the likes of Aldi and Lidl saying they were "a different proposition" offering a narrower range of products.

"They are doing a good job for their customers and we want to continue to do a good job for ours," he said.

But Mr Clarke indicated that Asda remained "mindful" of the budget chains, saying that it had halved its price gap with Aldi in the last 12 months.

Like other major supermarkets, it is pulling back to a degree from the so-called "space race" of rapid expansion with enormous new stores.

It said it continued to have an "aggressive" strategy for opening new stores though space will grow by 369,000 sq ft this year compared with a recent annual level of around 500,000 sq ft.

It has previously announced that it is opening 12 stores and creating 2,500 jobs in the UK this year.

But Asda is not joining the major shift to concentrate on small convenience stores now being championed by its major rivals, instead stressing the "convenience" of its click-and-collect offering.

The roll-out of the format means customers are able to shop online at lunchtime before stopping on the way home at a store, petrol station or other site where their purchases can be loaded into their boot.

The strategy is currently being targeted at parts of the country where Asda is under-represented. It said 47% of the public said they had no access to physical stores.

Leeds-based Asda , which is owned by US retail giant Walmart, has 568 stores employing 175,000 staff. Total sales in 2012 were £22.8 billion.
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