Asda sales up despite gloomy sector view

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The Independent Online
ARCHIE NORMAN, chief executive of Asda, yesterday reiterated his gloomy view of the outlook for food retailers when he warned that new store openings would 'substantially outstrip' demand, maintaining pressure on prices and margins, writes Heather Connon.

Mr Norman was the first food retailer to warn of the risk of saturation in the grocery market as supermarket groups and discounters covered the country with stores. His comments have recently been echoed by other big chains such as Tesco and Argyll - owner of Safeway - which have also cut back on expansion programmes.

Mr Norman estimates that, despite the cutbacks, selling capacity will increase by about 10 per cent as 100 superstores open and discounters continue to expand. 'The market is becoming tougher,' he said. 'If the annual 8 to 10 per cent increase in space continues and demand remains flat, there will be pressure on margins and sales.'

His comments came as the group disclosed a 43 per cent rise in underlying profits to pounds 201m in the year to April. Asda followed its rivals in writing pounds 153.9m off its property portfolio and depreciating the value of its stores. That, coupled with a pounds 130m loss on the sale of Allied Maples, its carpet business, meant it made a pre-tax loss of pounds 125.9m.

Sales at the Asda stores rose from pounds 4.4bn to pounds 4.8bn, or 8.9 per cent on a like-for-like basis. Mr Norman said the rise in sales and profits was better than it had expected two years into its three-year restructuring programme.

Earnings per share, excluding the exceptional charges, were 4.99p, up from 3.97p, and the dividend was increased by 10 per cent to 1.76p by way of a 1.21p final.

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