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Asda Sees EBITDA Increase Of 24%

Asda sign glass lantern (corporate)
  • Adjusted EBITDA after rent up by 24% to £1.078bn in 2023 – four consecutive quarters of YoY growth

  • Like-for-like sales increased by 5.4% – and total sales (excluding fuel) increased by 7.1% to £21.9bn

  • Adjusted EBITDA after rent includes contributions of £27m from the former EG UK stores, based on two months trading, and £54m from the former Co-op stores acquired by Asda

  • George – the market leader in back-to-school wear – grew clothing sales by 3.4% to £1.5bn

  • Underlying free cashflow up by 31% to £776m, enabling repayment of £200m Co-op loan and leverage reduction to 3.0x from 3.9x

  • Circa 6m customers regularly using Asda Rewards and half of all sales now linked to the app

  • Served more than 2.2m meals to children in 2023, as part of the “Kids eat for £1” café initiative

Asda has today announced its full year results for the period ending 31 December 2023 – delivering a 24% increase in adjusted EBITDA after rent to £1.078bn driven by like-for-like sales growth from its continued focus on value for customers, and the impact of strategic acquisitions.

The supermarket grew LFL sales (excluding fuel) by 5.4%, as customers responded to Asda’s ongoing investment in value last year and previously during the toughest times of the cost-of-living crisis.

As a consumer champion, Asda reduced prices on more than 800 popular everyday products in 2023, passing on the benefits of commodity price deflation where it occurred and maintaining its position as the lowest-priced traditional supermarket. Total sales, excluding fuel, increased by 7.1% to £21.9bn last year.

Asda also continued to invest in enhancing the quality of its food, building on the earlier successful launch of its budget-friendly Just Essentials brand, with a significant own-label transformation programme. This saw Asda launch thousands of new or improved food lines to drive quality perceptions among customers last year, including a refresh of its entire ready meals range. The supermarket also grew clothing sales by 3.4% to £1.5bn, as shoppers responded positively to its ongoing focus on the style, quality and price credentials of its George brand.

The £1.078bn Adjusted EBITDA after rent includes contributions of £27m from the former EG UK stores, based on two months trading, and £54m from former Co-op stores – demonstrating the strategic value of acquiring these businesses in the growing convenience and food-to-go sectors.

Mohsin Issa, Asda’s Co-owner, said: “Asda is a supermarket powerhouse built on rock-solid foundations – as our strong annual results and the 18m customers who shop with us every week demonstrate. Our strategy is all about growth and Asda increased underlying profit to more than £1bn and like-for-like sales by over 5% last year, while significantly growing free cashflow and reducing leverage. We are committed to doing the right thing for customers, colleagues and local communities – and are putting in place the strategic building blocks to set up Asda for long-term success.

“As well as investing in price to maintain our position as the cheapest traditional supermarket, we continued to invest in further enhancing the quality of our products, building on the earlier successful launch of the budget-friendly Just Essentials brand with a significant own-label transformation programme. This saw us launch thousands of new and improved food lines to drive quality perception among consumers, including a refresh of our entire ready meals range.

“This investment includes non-food and saw George maintain its market leadership position in back-to-school wear and deliver total clothing sales growth of 3.4% last year* – *helped by our ongoing focus on price, quality and style.

“We continue to strengthen the business by expanding in the growing convenience and food-to-go sectors,  leveraging our loyalty app and driving innovation in online grocery where we are the UK’s second largest supermarket.

“I would like to thank our colleagues for their hard work over the last year, serving millions of customers each week. Our recent investment in pay – a record £150m – will see Asda become the highest paying traditional supermarket in the UK and reflects how much we value the contribution of every colleague.”

Financial highlights

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Michael Gleeson, Asda’s Chief Financial Officer, said: “After taking full ownership of Asda in June 2021, the priority of the shareholders was to invest in colleague pay and help customers during the most challenging period of the cost-of-living crisis. This included the successful launch of our budget-friendly Just Essentials range and resetting the supermarket’s opening price points, as well as later launching the Asda Rewards loyalty app. These investments resonated with customers and helped to drive significantly higher sales in 2023.

“Around half of all sales are now linked to Asda Rewards and around six million customers use the app – making it a vital tool for them to manage their household budgets as well as being a key revenue driver for the business. The shareholders have also invested to fill the previous strategic gaps in the business, including acquiring the Co-op and EG UK convenience stores – which have already boosted annual earnings and helped grow Asda to more than 1,000 sites for the first time.

“Asda is a highly cash generative business, with strong liquidity, including more than £1bn in cash on the balance sheet at year end. The significant increase in both underlying free cashflow and adjusted EBITDA after rent last year enabled us to reduce leverage by almost a full turn to 3.0x.”    

Strategic highlights

Asda made significant strategic progress in FY23 including taking full control of 116 convenience stores and three development sites from the Co-op, as well as acquiring 356 predominantly freehold sites of EG Group’s UK business. These acquisitions will accelerate the supermarket’s growth in convenience and food-to-go sectors – and bring Asda’s heritage in value to many more customers.

Since taking full ownership in June 2021, the shareholders have invested significantly in the business: growing its store footprint from 623 to more than 1,000. This will give Asda the strongest possible platform for future success and to achieve its long-term goal of becoming the number two supermarket in the UK.

Asda continues to be highly cash generative and increased free cashflow by 31% to £776m in 2023, which enabled it to repay a £200m loan facility used to acquire 119 Co-op stores (including three development sites) and reduce leverage.

This improved cashflow generation contributed to Asda reducing its total net leverage as a multiple of adjusted EBITDA after rent to 3.0x from 3.9x – and the business is fully committed to further deleveraging.

Asda’s net debt at the end of FY23 was £3.8bn, net of more than £1bn cash on the balance sheet. More than 90% of this debt is secured on fixed rates of interest.

Committed to growth

  • Rapid expansion of Express format: 479 current sites (versus 3 at the end of September 2023), enabling Asda to reach the landmark of 1,000 UK sites for the first time in its 59-year history.

  • On track to have 500 Express stores by the end of this year as new ‘standalone’ sites open throughout the UK. 

  • George clothing sales grew by 3.4% to £1.5bn, while non-food LFL sales in Asda’s main estate grew by 1.7%.

  • In online grocery, Asda maintained its number two grocery home shopping market position throughout FY23 due to continued investment in price and innovation.

  • This commitment to growth has continued into 2024:

- In Q1, Asda was the first supermarket to price match both Aldi and Lidl across a broad range of popular everyday products – reducing prices by an average of 17%.

- This was followed by the launch of ‘Mega Event’, providing substantial discounts on selected branded products every weekend and ‘Fab 5’ featuring five produce items at market-leading prices, refreshed every fortnight.

- George grew online fashion sales by value by 13.4% over the 24 weeks to 3rd March 2024, according to Kantar – representing a notable outperformance to a 2.1% increase across the wider market.

- George also outperformed the fashion market in Asda’s stores. Its fashion sales by value in store rose by 5% over the 24 weeks, compared with 0.7% across the market.

- In homewares, George at Asda this year launched a brand-new collection with TV presenter and interiors enthusiast Stacey Solomon.

Best for customers and communities

  • Since launching Asda Rewards in August 2022, customers have saved over £400m in Cashpots to spend in store or online – with circa 6m regular users of the app

  • Best-value traditional supermarket throughout 2023, topping the Grocer 33 weekly price comparison survey 36 / 50 times, and the Which? ‘big shop’ price survey 11 / 12 months.

  • Investment in quality saw a complete refresh of the ready meals category and introduction of four new ready meal sub-brands: House of Yum, Bom Bahia, Bistro and Takeout Club for restaurant-inspired dine-in-dinners. Other refreshed categories include food to go, cooking ingredients and core chilled.

  • Own-label transformation programme continues in the coming months with the redesign and relaunch of 1,500 mid-tier ambient lines.

  • Served more than 2.2m meals to children in store cafés, as part of Kids Eat for £1 initiative.

Best for colleagues

  • Announced a record £150m investment in retail pay in Q1 2024 to make Asda the highest paying traditional supermarket.

  • Rates increasing by 8.4% for hourly-paid store colleagues in Asda Retail and Asda Express, rising to £12.04 from 1st July. Rates inside the M25 will rise to £13.21.

  • Total increase of 28% in retail pay since the acquisition of Asda by the Issa brothers and TDR Capital completed in June 2021 – with a total pay investment of almost £415m.

Here is the updated Fact Sheet for Asda, all figures correct as of April 2024.

Source : Asda

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22 April 2024

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