Asda eyes tough year ahead after fourth-quarter disappointment

Poor fourth-quarter results dragged down full year sales at Asda, the UK supermarket chain owned by Wal-Mart, despite an extra £100m invested in prices.

Asda reported a 1% fall in like-for-like (LFL) sales with trading deteriorating in the final 12 weeks to 4 January to a fall of 2.6%.

Recent industry data from Kantar showed Asda was now losing market share, coinciding with improved trading from market leader Tesco and close rival Morrison’s.

The grocer invested £300m in lowering prices in 2014, £100m more than planned, and announced it would invest £600m in 2015 in expanding and improving its store estate.

But president and chief executive Andy Clarke admitted the company was surprised by the dramatic shifts in the UK grocery market last year.

"2014 saw an acceleration in the structural shift in the market and whilst we saw it brewing and put the right plan in place to address it – delivering solid wins for our business and keeping the ship steady in a turbulent market, the pace and scale of change has exceeded all expectations."

Ramping up its online offering, the company opened 200 new click-and-collect sites last year, taking the total to 600 by the end of 2014 as part of its end-2018 target of 1,000.

In September, Asda acquired a state-of-the art click-and-collect technology that will allow customers to collect shopping from "stand-alone, temperature controlled intelligent pods in under 60 seconds", with the first due to open in the second quarter this year.

Last year was the first in Asda's five-year strategic plan, which Clarke called "a workout to limber us up for what is to come in 2015 – by leading the price agenda in a deflationary market".

But broker Shore Capital said it believed Asda's management will be disappointed with the late-year slump, despite their claiming the "retail market as a whole slowed significantly".

"With deflation starting to feature in the UK grocery market towards the end of the calendar year, we suspect that the Q4 volume performance was better than the cash value."

In light of Tesco's and Morrison's recent improvements, Shore said: "With both of its key competitors regrouping, Asda may find the going quite challenging in the year ahead too."

Wal-Mart misses sales expectations, plans living wage investment

Parent company Wal-Mart reported a 1.4% sales increase in the fourth quarter, but missed expectations, with a 3.5% rise on a constant currency basis.

In FY2016 Wal-Mart is going to continue to invest in E&M commerce with a material commitment to people training, with 500k staff gaining pay awards that will probably impact margins ($1bn) – the company states that its operates will earn $1.75 above the federal minimum wage or $9/hour.