Asda steps up price war with new pharmacies

NIGEL COPE

Asda stepped up its campaign for cheaper basic healthcare products yesterday when it announced it was buying 10 pharmacies that would be added to Asda stores. The deals mean Asda will have pharmacies in half its 207 outlets, all of which will stock the cheaper Asda brand of vitamins, minerals and paracetamol.

The announcement came as Asda unveiled a 24 per cent increase in profits to pounds 304m and said it was still undecided on the launch of a nationwide loyalty card. Asda has been testing a card in 18 stores for more than a year but is now the only one of the big four chains without a nationwide scheme.

Asda chief executive Archie Norman said the company had the technology to launch a card but had not decided whether or when to strike: "I'm not interested in putting prices up today just to give someone vouchers in three months time," he said. "But we do recognise that loyalty cards have something to offer. Their day will come."

Mr Norman said Asda would continue its campaign against resale price maintenance on non-prescription medicines in spite of opposition from smaller pharmacists who say independent operators may be forced out of business. "We calculate that this is costing the British public some pounds 300m per annum and that 80 per cent of this goes in excess margin to major suppliers and multiple retailers."

After successfully attacking the Net Book Agreement which collapsed last year, Mr Norman said the company would seek other areas where Asda could offer lower prices. Though the company would not be drawn on its next area of attack, it refused to rule out that compact discs may be a target.

Asda revealed that its book sales had increased by 50 per cent since the collapse of the NBA. Its entertainment sales, which include compact discs, have now reached pounds 100m. Asda now claims it is the UK's fifth largest entertainment retailer, just behind WH Smith.

Asda's profit figures mark the beginning of Asda's like-for- like sales improved by 12 per cent last year, the best performance in the sector. With growth rates like these the management question whether a loyalty card is necessary. Mr Norman said that demand was slightly higher and that the trend was expected to continue through the year. "There is more cash around in the household budget."

Asda's meat sales increased in spite of BSE though petrol profits were dented by the price war. Gross margins were reduced by just under 0.5 per cent to help drive sales. A similar reduction is expected this year.

Apart from petrol where the price war has stripped away almost all of Asda's fuel profits, other disappointing areas included the clothing range where buying mistakes and the weather led to disappointing first-half sales. However, the company still intents to make the George brand second only to Marks & Spencer in terms of sales.

Asda plans to add eight new superstores this year, compared with the previous year's seven. The expansion should add another 3,000-4,000 jobs to the current army of 75,000. Asda hopes to replace its card based "clocking on" system with a swipe card equivalent that will be more accurate and efficient.

Asda has invested pounds 24m of a planned pounds 70m investment on new technology. This includes sales-based ordering which has been introduced to 19 stores so far.

The share option scheme will be extended to another 10,000 staff, taking the total to 41,000. Asda also plans to increase the penetration of its own brand from 34 per cent to 40 per cent of total sales by 1998. In 1995/96, 2,000 own-brand products were launched. a new range of fruit juices is the next to be added.

Group sales increased from pounds 5.7bn to pounds 6.5bn. The dividend was increased by 20 per cent to 2.65p. Asda shares closed 4p down at 114p.

Comment, page 21

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
CSKA Moscow celebrate after equalising with a late penalty
football

Arts and Entertainment
music
Life and Style
Designer Oscar de la Renta takes a bow after showing his Spring 2015 collection in September, his last show before his death
fashionThe passing of the legendary designer has left a vacancy: couturier to America’s royalty, says fashion editor Alexander Fury
Life and Style
tech

Company reveals $542m investment in start-up building 'a rocket ship for the mind'

News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album