Asda has reported its first sales growth in over two years, according to a report from Shore Capital. The supermarket's sales at established stores, excluding fuel, rose by 0.2% in the seven weeks ending August 18. This comes after a 2.3% decline in the previous quarter, which ran from April to June. Total sales, including fuel, increased by 2.1% during the same period, reaching £6.5 billion. Ex-fuel revenues were £5.1 billion.
Key Details
Executive chairman Allan Leighton called the sales increase a "huge milestone" for the company. He said Asda is attracting more customers through competitive pricing and better online services. The company has faced challenges since its acquisition by the Issa brothers and TDR Capital in 2020. These challenges include a significant debt burden and IT issues that affected inventory management. Leighton returned to lead the turnaround efforts in November 2024 after being away for two decades.
Background
Despite the recent sales growth, Shore Capital warned that Asda is still highly leveraged and needs to recover profits. The firm stressed that the current recovery is just the start of a longer-term plan. Leighton has described this plan as a three- to five-year program. Competition from discount retailers like Aldi and Lidl remains a threat. Aldi is now just one percentage point behind Asda in market share.
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Asda's improved sales figures may boost investor confidence in the retail sector, especially for grocery stocks. This positive trend could affect trading in shares of competing supermarkets, such as Tesco and Sainsbury's, as they respond to Asda's recovery efforts. Watch for more updates on Asda's quarterly performance and any strategic announcements from management in the coming months.
Based on reporting by: proactiveinvestors.co.uk, theguardian.com