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Asda Reports Sales Slowdown Despite Loyalty Scheme Success

by April 22, 2024
April 22, 2024
Asda Reports Sales Slowdown Despite Loyalty Scheme Success

Asda, the UK’s third-largest supermarket chain, has reported a slowdown in sales growth for the fourth quarter of its latest financial year, posing challenges for its owners who are striving to enhance sales while reducing costs.

Like-for-like sales increased by 2.2% in the fourth quarter, contributing to an annual sales growth of 7.1% to £21.9 billion in 2023. However, this growth marks a significant deceleration compared to previous quarters, with sales rising by 2.8% in the third quarter and 9.6% in the second quarter.

The owners, including the Issa brothers and TDR Capital, purchased Asda from Walmart in 2021, and the subsequent leveraged acquisition has strained Asda’s competitiveness amidst the current cost of living crisis. Despite the sales slowdown, Asda has seen a rise in customers using its loyalty app, Asda Rewards, with approximately half of all sales now linked to the programme. Additionally, the company has passed on commodity price deflation to consumers and reduced prices on over 800 everyday products.

Asda’s free cash flow increased by 31%, enabling the repayment of a £200 million loan facility and reducing leverage. Adjusted earnings rose by 24%, reaching £1.078 billion. Amid leadership and ownership changes, including reports of Zuber Issa selling his stake in Asda to TDR Capital, Mohsin Issa is anticipated to step back from day-to-day operations at Asda, signaling a potential reset and the appointment of a new chief executive.

The publication of Asda’s annual results coincides with reports of significant changes in its leadership and ownership structure. Zuber Issa is reportedly in talks to sell his 22.5% stake in Asda to TDR Capital, which would increase its stake to about two-thirds. Meanwhile, Mohsin Issa is expected to step down from the joint CEO position at EG Group, the petrol forecourts empire he built with his brother. These changes reflect a broader reset within Asda and its parent company, EG Group, amid evolving market dynamics and strategic priorities.

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Asda Reports Sales Slowdown Despite Loyalty Scheme Success

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