Asda is making “good progress” in its bid to restore Asda as the UK’s second largest supermarket, despite reporting a 24% drop in profits to £886m.
In the Big 4 grocer’s full year trading update for 2022, co-owner Mohin Issa described the drop in profits as “a highly resilient performance”, confirming that the decline came as a direct result of investing into the business.
Total sales increased marginally at the supermarket, rising by 0.1% to £20.452 billion, with like-for-like sales up 5.1% in the second half of the year.
Issa said the supermarket – now in its second year of private ownership – had made a “conscious decision to support customers by investing heavily to mitigate the impact of inflation and keep prices as low as possible”.
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“Although this contributed to a decline in profitability, it was the right thing to do for our customers and will ultimately help to deliver long-term growth,” he continued.
In addition to “tackling the issues of the day,” Issa said Asda had “made good progress laying the foundations to restore Asda to the number two position in UK grocery”.
He added that it planned to do this by “focusing on giving customers desirable products at affordable prices and the ability to shop with us whenever and however they like”.
The grocer also came out on top as the best-performing traditional supermarket during the festive period with like-for-like sales up 6.4% year-on-year in the 12 weeks to December 2022.
Sales continued to rise into the new year, recording a 6.8% increase in like-for-likes for February 2023.
As part of its ongoing investment to help keep prices low, Asda dropped the price of more than 100 branded and own-branded lines by an average of 12%, locking these in until the end of the year to give consumers more certainty over their shopping bills.
The supermarket giant also launched Just Essentials – a new 300-strong value range which has seen sales rise by 73% year-on-year – and rolled out the Asda Rewards loyalty programme, which is used by 4.2m active customers each month, with 37% of total sales linked to the scheme.
A focus on convenience saw the supermarket giant rolling out new ‘Asda Express’ stores over the period, with 30 more following this year. To accelerate this growth, Asda acquired 129 convenience stores and attached petrol stations from Co-op for £438m.
Earlier this week, the Competition and Markets Authority (CMA) said that it was considering accepting Asda’s plans to appease competition concerns over this deal, which will see it offloading 13 of these sites.
Global Data retail analyst Joe Dawson agreed that Asda’s “steady performance” could be “attributed to a strong pricing and customer service strategy in the face of the cost-of-living crisis.”
He also applauded the grocer’s loyalty scheme, adding that the gamified experience of completing ‘missions’ and promoting ‘star products’ “gives an incentive for shoppers to continue purchasing from Asda instead of switching to the discounters”.
