ASDA must address its poor clothing and GM performance to remain competitive, says GlobalData

Following today’s release of ASDA’s figures for Q3 FY2021; Kunaal Shah, retail analyst at GlobalData, a leading data and analytics company, offers his view: “Despite having a weaker 2020 than its competitors, ASDA’s Q3 performance indicates that its fortunes are yet to improve, with both Tesco and Sainsbury’s having reported positive like-for-like (l-f-l) sales in their H1 FY2021/22 results ending 28 August and 18 September respectively. Comparatively, ASDA’s l-f-l sales down 0.7%, while its revenue (excl. fuel) fell by £31.6m to £4,929m in Q3 FY2021. Nevertheless, on a two-year basis, the grocer’s l-f-l sales (excl. fuel) did increase by 2.0% on Q3 FY2019, though this is poor compared to its competitors, with Tesco having report 8.9% growth in its two-year H1 FY2021/22 l-f-l sales. Year to date, its performance has been hampered by a poor result in Q2 and Q3, with its Q1 sales, which were up 7.3%, driving ASDA’s one-year l-f-l sales that are up 2.0%. ASDA must have a strong festive period if it is to retain this l-f-l growth for the year and taking steps to ensure strong stock availability will be essential. The measures it has taken via chartering a cargo ship for key festive lines and increasing online delivery capacity from 765,000 to 1m slots in the week before Christmas is a strong signal that ASDA are willing to do what it takes to have a successful end to the year.

“Food like-for-like sales declined 0.9% in Q3 FY2021, as the grocer came up against increased demand in 2020 driven by lockdowns boosting in-home food consumption. Nevertheless, on a two-year comparison, l-f-l food sales have risen 3.4%, with much of this driven by a strong online performance as online grocery sales rose 80% on Q3 FY2019. ASDA has rolled out its one-hour Express Delivery proposition to 96 stores across the UK as of October 2021, as well as expanding its partnership with Uber Eats from 200 stores to more than 300 stores. This will cater to the increasing demand for rapid delivery, and ensure it remains competitive in this quickly expanding segment of the market. However, with Sainsbury’s ChopChop and Tesco Whoosh services, as well as other grocers and convenience players entering partnerships with delivery providers like Deliveroo and the rise in independent rapid grocery delivery providers such as, Gorillas and Getir, also catering to this trend, ASDA will come under increasing pressure to accelerate this expansion to a greater proportion of its store portfolio particularly in city centre locations, such as London and Manchester.

“While food sales are lagging behind 2020, there is some improvement on 2019 sales, in comparison, both clothing & general merchandise are lagging behind, with these categories declining on a two-year l-f-l sales basis (-9.9% and -0.5% respectively). ASDA recently announced the expansion of its trial partnership with New Look into an additional eight stores, bringing the total to 10 but this will have a negligible impact in the short term given its still limited reach. The grocer has also increased the number of brands on its George website including Missguided and Threadbare, with this widening its appeal among younger consumers. It should also bring in other brands to the website such as Apricot to attract its new target market while maintaining its focus on legacy shoppers through its own-brand collection.”