Comment: Asda aims to kick sales falls into touch

Asda’s weak second-quarter performance will have done little to quell the whisperings that boss Andy Clarke’s position is under pressure.

However, the rugby-loving Clarke tackled critics head on this week with a typically robust defence of the company’s performance, arguing it is faster, fitter and better placed than its rivals to win in the long term. And he stated emphatically: “I’m here to stay.”

The grocer reported the worst quarterly sales slump in its 50-year history on Tuesday, after like-for-like sales fell 4.7%, and 5.2% excluding petrol, in the 11 weeks to June 30, hit by declining footfall especially in fresh food.

Clearly Asda is not immune to what Clarke described as “incredibly challenging times” for a grocery market undergoing “unprecedented change”.

Yet the scale of Asda’s underperformance has still shocked many. Not only is its market position deemed more defendable against
the onslaught of the discounters, it also continues to be viewed as a strong operator.

In many ways, under Clarke’s stewardship Asda has reacted quicker than its rivals to the changing rules of the grocery market.

It has led on price with its everyday low price strategy, invested heavily in services such as click-and-collect, and reorganised with courage around a multichannel future.

Yet Clarke, faced with that ugly sales trajectory, has been forced to admit that Asda had reached a “nadir”.

The grocer’s issue seems to be that consumers are failing to hear its story through the din of the current price war.

Asda’s competitors have frequently mirrored its EDLP message, and in so doing chipped away at its positioning, while the level of vouchering across the sector has further eroded its messaging.

But Clarke’s message yesterday was for a sense of perspective. Profits after all were flat, outperforming its rivals, and as the vouchering landscape eases, Asda’s low cost operating model and structural advantages should see it well placed to leverage its strengths.

Despite that, the current lack of resonance with customers is not being taken lightly and work will need to be done to reassess its positioning and sharpen its proposition. A change in the way it communicates with customers - moving away from a fixation on price - is already under way and bearing fruit in the third quarter, Clarke said.

The retailer revealed it is completing an “intensive piece of research to understand what drives current buying decisions”, and
Clarke reiterated that the company “won’t get side-tracked by the short-term fixes that are saturating the supermarket industry”.

The message was quite clear this week and to use another rugby analogy, Clarke believes Asda is successfully doing the hard
graft up front now that will allow it to score more freely as the game opens up when macro conditions are more favourable.