After three years of sales decay, Asda finally turned the corner today by returning to like-for-like growth.
When the grocer’s sales inched up 0.5% in the second quarter of 2014, it could not have predicted the long, hard slog that would follow to return to positive territory.
As the discounters ramped up their growth, Asda’s core unique selling point – its value proposition – slowly became irrelevant in the eyes of the consumer.
Shoppers’ heads were slowly being turned and the warning signs were there for Asda as like-for-likes barely crept above flat in the first two quarters of 2014.
“We won’t be knee jerked into reacting to short-term tactics. Vouchers can win quarters, but strategies win decades”
Andy Clarke, September 2014
Its mainstream rivals attempted to hit back through promotions and vouchering, a strategy Asda’s then-boss Andy Clarke refused to adopt.
As a result, like-for-like sales slipped 1.6% in the 13 weeks to September 30, 2014, but Clarke insisted at the time he was “pleased with Asda’s performance in a distressed market.”
On the new grocery landscape the discounters had created, Clarke added: “A new reality is upon us and although we were the first to adapt, we need to do everything to remain ahead of our traditional competitors whilst removing reasons for customers to go to the small discount shops.
“That’s the strategy we are on and we need to keep accelerating it.
“We won’t be knee jerked into reacting to short-term tactics. Vouchers can win quarters, but strategies win decades.”
Two more periods of decline followed before Asda hit what Clarke labelled the grocer’s “nadir” – a 4.7% slump in the second quarter of 2015.
The highly promotional landscape was again blamed for Asda’s downturn in fortunes, but there was more to Asda’s fall from grace than that.
And by the middle of 2015, Tesco’s new boss Dave Lewis – parachuted in from Unilever in September 2014 – was starting to have an impact, not just on the fortunes of his own employers, but on Asda, too.
When Asda’s sales tumbled 5.8% in the final 13 weeks of 2015, Clarke said its poor golden quarter performance was impacted by a resurgent Tesco, claiming the Christmas recovery of Britain’s biggest retailer “surprised us all.”
“There’s still much more to be done, but we’re clearly headed in the right direction”
By that point, Asda had suffered six consecutive quarters of decline – and parent company Walmart was starting to get twitchy.
Just a month after posting a 5.7% drop in sales during the first quarter of 2016, Asda’s parent company Walmart revealed that Clarke was to step down and be replaced by the boss of its Chinese arm, Sean Clarke.
One of his first duties was to unveil Asda’s worst ever quarterly performance – a 7.5% nosedive in like-for-like sales during the three months to June 30, 2016 – as Walmart insisted it was battling to transform the grocer’s fortunes “with urgency.”
Clarke was given the green light to plough investment into price, the first two waves of which came last September, while time and money was also ploughed into improving product quality, in-store availability and customer service.
Since then, Asda has backed up Walmart’s regular claims of “sequential improvement”, gradually improving its performance on a quarter-by-quarter basis.
Yet today’s sales increase, while providing a platform to build upon, by no means marks the end of Asda’s recovery.
As Walmart chief executive Doug McMillon rightly put it: “There’s still much more to be done, but we’re clearly headed in the right direction.”
Clarke’s challenge will be to keep that momentum going in what remains a turbulent market.