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Asda praying for a “Christmas Made Better”

Sales performance was significantly behind the competition reporting a 5.8% decrease in like for like sales for Asda’s third quarter. This has resulted in a market share slump, down significantly compared to a year ago, and puts Asda in a weak position as it heads into the lucrative golden Christmas quarter.

This is the ninth consecutive quarter of sales decline and the promise of a turn in fortunes is overdue. Project Renewal has yet to make a difference as far as we can tell but in a way, this is no surprise – an inward looking retailer will get the results it has always had without a fresh perspective.

It is early days in what has become a year of change in the board room at Asda, but we finally have a reason to believe that things will start changing. New appointments made from outside of Walmart will bring new experience and ideas into Asda, particularly when you consider that experience has been acquired at Co-op, John Lewis and Sainsbury. This might actually be the trigger for change, finally.

As much as the “Christmas made better” campaign lacks the blockbuster/tear-jerker/side-splitter formula so many retailers are adopting, the series of short sound-bite ads works for us. Each mini ad promotes a product or range that is worth heading to Asda for. They are almost old-fashioned, but they are simple, effective and memorable which is really the point, isn’t it?

Dodging the heavy price led messages of Black Friday feels like the right decision, bringing focus on good value through everyday prices suiting the demographic rather than getting drawn into what has become a fortnight of margin erosion and bringing sales forward. Talking of margins, Asda’s GP is reportedly holding up but with a weak sales line, profits are being hit. It’s all about volume for Asda now and that means traffic.

Asda survived the card reader chaos at the tills relatively intact given the magnitude of the problem and rode out hygiene concerns in delivery vans. But any further disruption to in-store payment or online purchases will only dent the already fragile sales line. We expect belt and braces approach from here on to prevent any further hit to footfall.

We get a sense of hope from Asda, and we don’t think it is unfounded either. But the bottom line is footfall. Traffic was down again in Asda’s Q3 so we are expectant of more to come from the management team to encourage that footfall. Price cuts help in the very short term, but are quickly matched or beaten leaving nowhere else to go. Asda can do better, and it is highly probable that they will do better.

 

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