View from City Road: Asda has the power to prevail
Saturday 18 December 1993
The seasonal gesture, typical of Mr Norman's flair for PR, is meant to underline to staff and customers alike that the revival of Asda, which began the supermarket price war 15 months ago by slashing produce prices, is not simply about price-cutting.
None the less, it must surely be true that price aggression has been a big contributor to Asda's surprisingly strong 9 per cent increase in first-half like-for-like sales growth at a time when the industry saw increases of 1 to 2 per cent. Rearranging the Asda gondolas is one thing, but it can be no coincidence that sales volume in fruit and vegetables jumped 24 per cent.
Productivity gains are absorbing the shock of price cuts. An 8 per cent rise in sales per employee had net operating margins rising slightly from 4.1 to 4.3 per cent despite a near one-point cut in the gross margin.
In view of what has happened, Mr Norman and his team can claim that the first half of the self- imposed three-year recovery programme, designed to withstand tough price competition in an oversupplied market, has been a great success.
Margins only half those of J Sainsbury do not leave Asda well placed for price attrition or indeed a conventional depreciation policy, although write-downs have reduced property values to rock bottom.
Much now will depend on the success of the 'Renewals' programme, an extensive revamping funded from a pounds 200m provision in 1992. This shows every sign of boosting net margins and, despite a relatively low yield of 4.2 per cent against other food retailers, Asda has the earnings power to prevail in an out-of-favour investment sector. Mr Norman, after all, has millions riding on it.
- 1 Mario Balotelli: Staff at arson-hit Manchester Dogs' Home convinced Liverpool striker is behind five-figure donation
- 2 Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
- 3 iOS 8 is full of shiny new features - but it's terrible news for app developers
- 4 Friends 20th anniversary: Six things we wouldn't have without influential comedy series
- 5 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Scottish independence referendum results: David Cameron pledges plans for 'English votes for English laws' by January
Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
Scottish referendum results: David Cameron set to unveil major devolution of powers to England
Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...