Falling sales at Asda fuel fears of consumer slowdown

Asda reported its second successive quarter of falling underlying sales yesterday as it warned that shoppers were feeling the pinch from an increase in petrol prices and taxes.

The supermarket chain, owned by Walmart, said its like-for-like sales, excluding fuel, slipped by 0.4 per cent in the three months to 30 June. This followed a drop of 0.3 per cent in its first quarter, which was Asda's first fall in underlying sales for five years. Andy Clarke, who became chief executive in May, said: "I think it is the same as the first quarter. It is a continuation of the fact we were not as focused on our consumers as we needed to be."

He added: "We had some challenges around our basket spend and that is what we are working to address."

But Mr Clarke said Asda was fighting back by delivering on its "everyday low price" strategy, with fewer promotions and a focus on product quality. The company has removed a third of its multi-buy promotions over the past three months, and lowered prices on staple groceries, including milk, sugar, eggs and bananas, in recent weeks.

According to Kantar Worldpanel, Asda's sales grew by 2.9 per cent, which was behind Tesco's 3.9 per cent rise, Sainsbury's 5.9 per cent and Morrisons' 6.9 per cent in the 12 weeks to 8 August. The Kantar data monitors the grocery-buying habits of 25,000 demographically representative households. But Mr Clarke denied there was any tangible difference between the sales of the big four, saying: "You cannot get a bit of paper between all of us."

He acknowledged that shoppers had "less in their pockets than last year", and blamed higher petrol prices and the VAT rise to 17.5 per cent in January. Mr Clarke also warned of a "challenging" 12 to 18 months for consumers, given that VAT will go up to 20 per cent on 4 January and that shoppers are "worried" about job cuts in the public sector. The grocer said total sales grew by "low single digits" but declined to provide a figure.