ASDA needs loving care from new owners to rebound from bleak 2020 results, says GlobalData

Following today’s release of ASDA figures for Q4 FY2020; Thomas Brereton, senior retail analyst at GlobalData, a leading data and analytics company, comments: “ASDA has clearly struggled throughout 2020, culminating in a disappointing Q4 and Christmas period. While there are slight differences in the reporting periods of supermarkets, almost any calculation shows ASDA has significantly underperformed its Big Four and discounter rivals, all of which have recorded – as a minimum – a 7% increase in l-f-l sales over the final three months of the year. Although there are some mitigating circumstances – such as compassionately closing stores on Boxing Day – today’s results are well below par.

“We’ve now seen several consecutive periods of underperformance from ASDA, which points to underlying problems with its strategy that have been made more readily visible over the COVID-19 pandemic period. For example, despite ASDA’s relative strength in the online market pre-2020, others (particularly Tesco) responded to the shift of spend to the channel with much greater dynamism, ramping up store picking and fulfilment far quicker than ASDA. Many of ASDA’s propositional trials – such as the unveiling of its new sustainability store in October – show a similar theme, with ASDA moving in the right direction, but somewhat slower than competitors.

“It is clear then that, under the new owners (Mohsin and Zuber Issa), ASDA’s long-term strategy needs an overhaul. It must be comfortable knowing where it sits in the grocery market, particularly around its ability to maintain its value reputation against the prosperous discounters, and how that cooperates with expansion of the digital side of operations. Overcapacity is another important issue, and ASDA must implement more effective procedures than agreeing in-store partnerships with a jumble of retail partners – including tired brands such as Accessorize. But however ASDA proceeds, the Issa brothers must remain attentive to the business, else sales (and potential profits) will be eroded by the waves of better equipped retailers.”