Asda’s cuts deliver a win over Big Four rivals
Friday 15 August 2014
The supermarket Asda’s decision to launch aggressive price cutting to stop the immense rise of the discounters has seen the Walmart-owned grocer emerge as one of the big winners among its Big Four rivals.
However, the chief executive Andy Clarke warned that the grocer was still some way off reaching the same low prices offered by Aldi and Lidl, which have stolen customers away from Tesco, Sainsbury’s and Morrisons.
He said getting closer to them on price was a “medium term” strategy, but gave no clear indication when price parity could be achieved.
“We are narrowing the gap and in the long run we think our plans will work. This is a long game, not a short one.”
The comments came as the UK’s second biggest supermarket revealed sales in the 10 weeks to end of June rose 0.5 per cent on a like-for-like basis, making Asda the only Big Four supermarket to boost sales in recent months.
Tesco issued a profit warning last month, leading to the axing of chief executive Philip Clarke, Morrisons has seen its market share slump, while Sainsbury’s has reported two consecutive quarters of falling sales.
Even upmarket Waitrose is feeling the pinch, warning that profits are likely to take a hit when they are revealed next month.
Mr Clarke said: “The last quarter has seen unprecedented change within the food-retail sector, and whilst I do not underestimate the challenge currently presenting retailers, I am proud that our business identified and put plans in place to respond to these changes early.”
The retailer pledged to spend £1bn over five years to keep its prices low, before Tesco’s and Morrisons’ current price-drop strategy, to fight off the rise of discounters Aldi and Lidl.
However, Asda has felt some pressure from its rivals and has started laying off staff, with a total of 1,360 redundancies expected, while 7,000 managers are also being retrained. Mr Clarke called it one of the “most difficult decisions of my career”.
Asda also unveiled plans for major refurbishments of three stores, as he attempts to turn them into “destinations” where shoppers will spend several hours. Similar plans have been introduced with limited success by Tesco.
Online has proved popular, with market share hitting 18.4 per cent, with one in ten orders coming from click-and-collect sales.
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