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Asda sales growth stalls

Asda's sales growth almost ground to a halt in the first three months of the year as the tough trading conditions that have wreaked havoc on the high street hit the supermarket's top line.

The Walmart-owned supermarket group reported a like-for-like sales increase of 0.1% (excluding January's VAT rise), compared to a 1.6% rise in the previous quarter, as higher prices and weak consumer confidence combined with the late timing of Easter to drag down revenues.

Asda's underlying sales growth rises to 0.8% when the benefit of Easter is removed from last year's first quarter results.

The supermarket group's figures are better than the 0.7% underlying sales decline reported by Tesco in the three months to February 26th and the 0.2% rise recorded by Sainsbury's in the 10 weeks to March 19 – neither of which included Easter last year or this.

They lag behind the 2.5% rise reported by Morrisons in the 13 weeks to May, though that result was boosted by an increase in spending around the Royal Wedding at the end of April.

David McCarthy, retail analyst at Evolution Securities, said: "Asda's figures weren't too bad under the circumstances although the circumstances weren't great."

Asda's first quarter performance was announced as Walmart, the world's biggest retailer, reported a 3.8% rise in net profit to $3.4bn (£2.1bn) as international sales increased by 11.5% to $27.9bn. Underlying sales in the US fell by 1.1% in the period – it's eighth consecutive quarterly decline – as the discount chain's customer reel from high unemployment and petrol prices.

The supermarket's first-quarter figures were announced a day after Asda announced plans to open its first George stores overseas as the group seeks to turn its domestic fashion label into a major global brand.

Although the George label is already available in six countries at stores run by Walmart, the next phase of the brand's development would see it opening dedicated George outlets in other overseas markets through franchise agreements. Asda plans to begin by opening a handful of pilot stores in the Middle East in the first half of 2011 and hopes to sign up its first franchising partner in the next few months.

Easter fell at the beginning of April last year, but not until the third week of that month in 2011. This means that, while Easter weekend itself fell outside the first quarter in both 2010 and 2011, Asda benefited from the run-up to Easter last year but not this.

Removing the benefit of Easter and including the 0.25 percentage point increase in VAT brings Asda's first-quarter underlying sales growth to 1.7%.

Source : Tom Bawden -

17 May 2011
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