By Saabira Chaudhuri
LONDON--Asda, the British arm of Wal-Mart Stores Inc., on
Thursday reported its first fall in full-year sales since the
financial crisis and indicated that its challenges show no signs of
abating.
The U.K.'s No. 2 supermarket chain reported a 1% fall in sales
at comparable stores for 2014, and a 2.6% drop in this metric for
the fourth quarter, with U.K. Chief Executive Andy Clarke blaming
"a very competitive market where retailers drove unprofitable
sales."
Asda's results come as Wal-Mart reported its second straight
quarter of same-store sales growth in the U.S. on an increase in
traffic, although the retailer also issued weaker-than-expected
guidance for the year, in part because of plans to boost pay for
store employees.
Asda's fourth-quarter like-for-like sales drop is steeper than
the 1.6% decline it reported in the third quarter. Mr. Clarke said
U.K. rivals' short-term discounting tactics pressured Asda's
results, and he insisted the company would stand by its strategy of
sustained low pricing rather than sporadic discounting. "You can
only give away a GBP10 note for GBP9 for so long," he said at a
media briefing in London on Thursday. "We are just not going to
play that game."
Asda announced plans to spend GBP600 million ($915.44 million)
this year refurbishing existing stores, creating new stores and
opening new "click and collect" locations where customers can pick
up online purchases. The supermarket plans to add 150 new remote
click-and-collect sites and open 36 new gas stations. Asda opened
200 new click-and-collect sites in 2014, taking the number to 600
at the end of 2014.
The company plans to open 17 new stores, including three
supermarkets in London, this year. That strategy stands in contrast
with rivals, which have been scaling back plans to open large
stores as customers have moved toward shopping more frequently in
local stores instead of making one large weekly purchase. Tesco PLC
last month said it would close 43 unprofitable stores and shelved
plans to open 49 new ones.
Asda "is more aggressive on the new-space front than the
competition," said John Kershaw, an analyst at Exane BNP
Paribas.
Mr. Clarke said Asda has fewer large stores than competitors and
that the company still sees room to expand its physical footprint
in this area. "A majority of customers still want to come in and do
a weekly shop," he said. "Supermarkets continue to be key for
us."
Mr. Clarke described the retail market as being in "one of its
most challenging and changeable periods in history," and indicated
there would be little respite soon. "The data you already see in
the market for 2015 suggests it's going to be a very challenging
market for 2015 and 2016," he said.
During 2014, Asda spent GBP300 million lowering prices as
retailers continue to fight to attract customers. The company has a
five-year pledge to invest more than GBP1 billion cutting
prices.
Asda has a market share of 17.3%, according to the latest
figures from Kantar Worldpanel, which monitors the household
grocery-purchasing habits of 25,000 demographically representative
households in the U.K. Tesco is the U.K.'s No. 1 supermarket chain,
with a 29% share, and J Sainsbury PLC is close behind Asda, with
16.7%.
Ian Walker
contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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