Asda sales grew in Q1 but profit dipped

Higher growth in food and consumables before lockdown was partially offset by weaker demand for non-essential items, such as apparel, fuel and general merchandise

Written by Georgie Dobie

Posted 20.05.2020 | Retail

Asda sales grew in Q1 but profit dipped thumbnail

The Q1 2020 financial results for Asda have been published by parent company Walmart.

The period (1 January to 31 March 2020), which includes the weeks of stock-up activity seen across the UK before lockdown on 23 March, saw Asda’s like for like sales, excluding petrol, increase by 3.5 per cent (2.7 per cent net) compared to the same period in 2019. 

The supermarket also said that it had experienced a surge in demand for home shopping deliveries, with Asda.com receiving more than 3,500 visits per minute during the week commencing 18 March.  

Its smaller stores had also performed strongly amid the outbreak, as customers demonstrated a preference for shopping locally and avoiding travel during the early weeks of lockdown.  

But while Asda experienced growth in sales for the first quarter, gross profit declined.  

Parent company Walmart said that gross profit rate declined primarily as a result of a change in mix towards lower margin categories in response to Covid-19. 

The parent company added that higher growth in food and consumables, in response to Covid-19, was partially offset by weaker demand for apparel. Meanwhile on its corporate site, Asda reported a significant decline in demand for non-essential items, such as fashion, fuel and general merchandise, which it attributed to the temporary closure of 33 of its Living Stores in March in response to Government guidance. 

Speaking on Asda’s performance as part of the overall Walmart International portfolio, Brett Biggs, CFO of Walmart, recognised the significant impacts of Covid-19 on consumer spending and behaviour. He said: “As March and April progressed, we saw economic pressure, channel shift and mix shifts in most of our markets, with significant April sales declines at Flipkart, Africa and the UK, although the UK was mainly fuel related.“ 

Although Asda had seen strong top-line growth, the incremental costs related to Covid-19, also negatively impacted on gross profit.  

Speaking of the impact of Covid-19 on its customers, and the company’s planned response to the ongoing, challenging circumstances, Roger Burnley, CEO and president of Asda said: “However long Covid-19 is with us, we will continue to offer great value to customers, as well as investing in doing the right things to protect our customers, our colleagues and our communities - and fulfil our vital role in feeding the nation.” 

The Big Four retailer said that it had provided an extensive range of support to colleagues and local communities during this period. This included being the first retailer to confirm it would provide full pay to any colleague that needed to self-isolate, offering over 150,000 home delivery slots to extremely vulnerable customers and donating £5m to FareShare and Trussell Trust. 

Source: Asda corporate site

With two thirds of customers still concerned around safety in supermarkets, Asda has confirmed today that it is investing in more longer term measures to support social distancing in its stores, including trialling a ‘virtual queuing’ solution at its Middleton store near Leeds, which allows customers to ‘log in’ to the queue remotely and wait in their car to enter the store. The Supermarket has also extended the capacity of its ‘Food Box’ delivery service for vulnerable customers to 10,000 boxes per day. 

The grocer also recognised the challenges that its suppliers were also facing and said that it was doing all it could to help them through these difficult times. This includes shortening our terms so that small suppliers receive payment immediately and providing rent holidays to its smaller tenants. 

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