Following yesterday’s release of ASDA Q2 figures for FY2019, Thomas Brereton, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘ASDA’s headline positive growth for Q2 certainly seems encouraging, particularly given Easter’s unfavourable change in timings versus last year and tough growth targets for retailers as a result. Low or no inflation across key food and grocery categories such as meat and dairy, coupled with exceptionally difficult volume growth comparisons after last year’s fruitful summer, means ASDA is not alone in struggling among the supermarkets – Sainsbury’s l-f-l sales fell 1.6% over the same period.
“Following the collapse of its intended merger with Sainsbury’s, it appears to be all hands on deck for ASDA as it tries to continue 2018’s outperformance in the market, and promote its attractive proposition in advance of its £8-9bn IPO (planned for 2021/2022). ASDA will invest £80m in price reductions which will continue to force competitors to lower prices in turn, and maintain low market inflation. A further £100m will be spent on store refurbishments in an attempt to deter shoppers from switching to discounters and steal custom from Tesco and Sainsbury’s shoppers looking to save on their grocery bill.
“This is the right move for ASDA. While it continues to experiment with new ways to reach customers, such as its trial with Just Eat (delivering a 100 SKU range of groceries within half an hour in Leicester and London), its main focus should rightly be on its core store network – using price investment to bulldozer its Big Four rivals and building on its range and innovation to fend off the discounters. But ASDA must be wary of how Tesco and Sainsbury’s are cultivating own-brand loyalty through promoting close ties with customers (e.g. Sainsbury’s “Proudly Doing Our Bit” adverts). ASDA must ensure it highlights a similarly close relationship with its shoppers and staff, and avoid situations such as the protests in Leeds this week against ASDA’s new contract implementation.”