Asda sales growth slows

LONDON Tue Feb 21, 2012 3:58pm GMT

Trolleys are lined up outside an ASDA supermarket in London January 23, 2012. REUTERS/Finbarr O'Reilly

Trolleys are lined up outside an ASDA supermarket in London January 23, 2012.

Credit: Reuters/Finbarr O'Reilly

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LONDON (Reuters) - Asda, the British arm of U.S. retailer Wal-Mart Stores Inc, posted a slowdown in sales growth in its fiscal fourth quarter as shoppers cut back due to rising prices, muted wages growth and an uncertain economic outlook.

Chief Executive Andy Clarke said he was instinctively optimistic about prospects in 2012 but said it was too early to say if positive recent data on the UK economy represented a turning point or was merely a blip.

"Listening to customers they are still finding the prospects of the economy quite challenging," he told reporters on Tuesday.

Britain's second-biggest supermarket chain behind Tesco Plc said sales at stores open more than a year, excluding fuel and VAT sales tax, rose 1 percent in the 14 weeks to January 7.

That followed a 1.3 percent increase in the third quarter, but compared favourably with many of its rivals, prompting CEO Clarke to tell reporters: "We were the clear winners at Christmas, we won Christmas."

Asda said underlying sales rose just 0.1 percent in the last three months of 2011, followed by a surge in demand in the first week of January, when British shops traditionally offer unsold stock at cheaper prices.

Tesco reported a 2.3 percent drop in underlying UK sales for the six weeks to January 7, while industry No.3 J Sainsbury posted a 1.2 percent increase for the 14 weeks to January 7 and No.4 Wm Morrison a 0.7 percent rise for the six weeks to January 1.

CUTTING BACK

Many Britons have been cutting back spending over the past year as price increases outpaced wage rises and higher unemployment weighed on confidence. The lack of consumption has been one of the main drags on economic growth.

However, on Friday official data showed British retail sales rose unexpectedly in January.

That data, a string of strong business surveys and some stabilisation in the labour market have raised hopes that Britain's economy will avoid recession despite having contracted in the last three months of 2011.

Clarke said he expected trade to benefit from this summer from celebrations to mark the Queen's Diamond Jubilee, the Euro 2012 soccer championships and the London Olympics.

"We would like to recognise that when we have events our customers shop with us because the extra personality that Asda offers brings people in," he said.

The chain, which trades from around 540 stores, lagged Britain's grocery market in 2010 but fought back in 2011, helped by its purchase of smaller format Netto stores and a re-launch of its own-brand food range.

It has also benefited from its "price guarantee" which offers to refund customers the difference, via a voucher, if an online price comparison website does not show their shopping was at least 10 percent cheaper than at a rival.

"After some difficulties last year, Asda now seems to be successfully straddling the quality-price equation and will, in our view, be one of the major beneficiaries from Tesco's current difficulties," said analysts at retail research agency Conlumino.

The firm said last month it would invest over 500 million pounds this year, opening 25 new stores and three depots and creating up to 5,000 jobs.

Separately Wal-Mart, the world's biggest retailer, posted fourth quarter sales and profit that fell short of Wall Street expectations.

(Reporting by James Davey and Mark Potter; Editing by David Holmes and Jane Merriman)

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