Strong online growth keeps Asda marginally ahead of competition, says GlobalData

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Following today’s release of ASDA Q3 figures for FY2019, Thomas Brereton, Retail Analyst at GlobalData, a leading data and analytics company, comments: ‘‘Despite ASDA’s Q3 results revealing negative l-f-l sales growth – blamed on consumers restricting spend as a result of political and economic uncertainty – it performed better than its Big Four competitors, with a fall of 0.5% slightly less harsh than the 0.7% l-f-l sales decline experienced on average (of results available so far). ASDA was quick to focus on its buoyant online business, which again saw double-digit growth, and its online grocery penetration now sits well ahead of the market’s overall 7.3% level.

“ASDA has had a fairly quiet quarter with respect to the announcement of new concepts and strategies, with the most prominent being recent accelerated plastic reduction commitments to reach 30% recycled content in its plastic packaging by the end of 2020 – five years ahead of its original deadline. This is a clever move, with GlobalData’s 2019 How Britain Shops survey showing that consumers that use ASDA for the majority of their food & grocery shopping care the most (joint with Iceland) about product sustainability, reflecting the concerns of ASDA’s young shopper base.

“With the merger with Sainsbury’s falling through and ASDA advancing with plans to demerge from Walmart and IPO (set for 2021/22), ASDA now needs to fully prepare itself as a standalone business. The positives include its effective physical network (in which ASDA recently dedicated £100m towards store refurbishments to increase competitiveness against the discounters) and its strong online grocery business. However, without a convenience network, it is missing out on a faster-growing channel of the market; to rectify this it should consider the outright acquisition of an established network such as McColl’s (viable, given its market cap of c.£50m).

“A potential stumbling block for ASDA lies within its brand reputation. While Tesco and Sainsbury’s have both started to heavily leverage their established British heritage (both are using birthdays this year as an excuse to lower prices) to combat the discounters, ASDA has instead become embroiled in an ugly and public contract debacle, which – for shoppers that feel they have little to differentiate between ASDA and another supermarket – may result in lost sales over the vital Christmas period.”