ASDA profits break £1bn barrier

Asda weathered the supermarket price war better than its rivals it revealed today, with news that it smashed the £1billion profit barrier for the first time last year.

Although sales have deteriorated significantly more recently, the UK’s second-biggest supermarket said operating profits rose 1.9 per cent to £1.01billion in 2014, helped by its drive to reduce costs.

This is in contrast with Tesco, Sainsbury’s and Morrisons, all of which have seen major profit falls amid a fierce price war with the discounters aimed at luring back shoppers.

The big supermarket chains have lost market share to budget retailers such as Germany Aldi and Lidl, although Asda said its loss was minor at 0.1 per cent to 17.1 per cent.

The latest Kantar Worldpanel data, however, put Asda's UK market share at 16.7 per cent, down 0.6 per cent on last year.

Asda, owned by US giant Wal-Mart, said revenues fell 0.4 per cent to £23.2billion last year and sales at stores open over a year were 1 per cent lower.

Chief Executive Andy Clarke launched a five-year strategy in 2013 focused on lower prices but avoided the money-off vouchers adopted by its rivals. The firm invested £300million in lower prices during 2014.

However, Asda's sales performance has deteriorated significantly in 2015, posting its worst quarterly sales slump in 50 years.

The grocer posted a 4.7 per cent decline in like-for-like sales in its second quarter, worse than the 3.9 per cent fall in its first quarter. Mr Clarke said then that the supermarket had reached its ‘nadir’.

It comes as rival Tesco yesterday revealed a 70 per cent plunge in half-year profits for its UK and Ireland business despite seeing an improvement in under-pressure sales.

The retailer said like-for-like sales in the UK fell 1.3 per cent in the six months to the end of August - a marked improvement on the 4.6 per cent slide seen a year ago.

Source : Camilla Canocchi – ThisIsMoney.co.uk
www.thisismoney.co.uk/money/markets/article-3265120/Asda-weathers-supermarket-price-war-profits-smash-1bn-barrier-time.html