Woe at Walmart and Asda worries

published 20 August 2015

Asda has suffered the worst sales performance in its 50-year history. Like-for-like sales fell by 4.7% in the second quarter, though profits held firm. This was its fourth consecutive quarterly fall in sales. Ada has also lost its position as the UK's second-biggest grocer to Sainsbury's.

Asda's American parent, Walmart, cut its annual profit forecast as earnings for the three months ending on 31 July declined by 15% to $3.48bn. The group was recently eclipsed as America's biggest retailer by Amazon.

What the commentators said

Asda, by contrast, isn't stuck with too many US-style hypermarkets that have fallen from favour, said the FT's Jonathan Guthrie. That has saved it from huge write-downs. On the other hand, it has two handicaps, noted Larry Elliott in The Guardian.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

It has no presence in the smaller convenience stores that are growing popular as shopping habits change, and it has refused to follow Tesco and Morrisons in launching voucher schemes that are "in effect handing free money to customers". So its sales are poor, but its margins are holding up. Asda is "taking the long view", said Alistair Osborne in The Times, concentrating on earnings and refusing to chase sales. This approach "befits a company backed by Walmart's muscle".

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.