Asda reveals 2010 plans after reporting Q4 like-for-likes up 4.6%

For the year to January 31, 2010, chief executive Andy Bond said growth was driven primarily by an increase in customer numbers and a higher average spend.

Bond admitted that the final few weeks of the fourth quarter – its busiest trading period – was impacted by “some of the most challenging weather conditions we’ve ever experienced”.

He said: “As you know, we have far fewer stores than our competitors, so our 18 million customers have to drive a little further to get to us. Not surprisingly this meant the four weeks of snow and ice from December 18 impacted us more than any other food retailer.”

He said parent Walmart has signed a strategic agreement with supplier Li & Fung, which he said “will lead to lower prices in a number of non-food categories”.

This year, Bond said the grocer will renew its focus on Every Day Low Prices, and in January it launched its biggest range of rollbacks for a decade.

He said that while last year Asda was “still the clear price leader, we allowed ourselves to become too promotional”.

He explained that with falling inflation throughout the second half of 2009, by the final quarter it had all but disappeared. He said: “In times of falling inflation suppliers invest more heavily in promotions rather than investing in reducing the base price of their products. This type of promotional activity benefits high low retailers who are less interested in lowering real prices.”

Bond said that its EDLP model allows it to “aggressively lower prices across the entire store” and as a result “we have extended our price gap to all our major rivals”.

He said Asda will continue to invest in lowering prices across the board.

Bond said its clothing brand George is focused on offering even greater value. Its Wedding Collection will offer couples wanting to keep costs down the chance to kit out their entire wedding party for under £200.

It will open an office in Bangladesh in April, which he said will allow the grocer to conduct unannounced audits more easily.

As widely anticipated, Bond said Asda is moving “to open a new chapter”. He said this will be achieved from smaller supermarkets and the expansion of Asda Living.

Last year it created a separate division for 21 of its smaller stores under 25,000 sq ft. It also bought three smaller Co-op stores ranging from 10,000 sq ft to 17,000 sq ft. He said: “I’m confident we have a model that we can now accelerate in this market.”

He will also accelerate the roll out of Asda Living.

Bond said its grocery home shopping business increased by nearly 50% last year. It has 97% coverage across the UK, and the Morley home shopping picking centre trial has been a “success”. He said Asda is now searching for more locations for picking centres.

He said Asda Direct “continues to grow stronger” and both Asda Direct and George.com have attracted “more than 65,000 product reviews”. Both these websites are supported through an instore collect service, which will be available nationwide from next month. Asda aims that at least 10% of George sales will come from online purchases.

He said Asda will lower costs further this year via its sourcing deal with Walmart. Asda is taking a key part in Walmart’s recently created Global Merchandising Centres strategy. The George team at Lutterworth is acting as the global hub for fashion.

Walmart’s deal with Li and Fung will further enhance this sourcing deal, Bond said. Walmart has also bought International Produce in the UK. International Produce was formed just over five years ago as “a dedicated supply partner for Asda’s produce business, importing amongst other things melons, stone fruit, grapes, apples and citrus”. He said it is now one of the largest importers of produce in the UK.

Bond said that by bringing this operation in-house, it will create “huge cost savings opportunities” for Asda, as “we begin to benefit from the increased volumes needed to supply other Walmart businesses around the world”. He said the business already sources citrus for stores in the US and advocados for stores in Japan.

He said: “Through a combination of better joint sourcing of product with Walmart; the introduction of new global merchandising centres; and removing the middleman wherever possible, we’re set to unlock the full potential of our relationship with Walmart, leveraging its global scale far more effectively, which in turn will lead to lowering prices for customers.”

Bond added: “With the prospect of VAT going up further, and the uncertainty about job security - particularly in the public sector - while we’re hoping it won’t be, we’re planning for this being an extremely tough year for our customers.

“Our growth strategy is in good shape and we are well set to open a new chapter and broaden and accelerate our business, grow customer numbers and increase our market share.”

Asda revealed this morning that its staff would share a bonus pot of £26m - 18% higher than last year’s payout. It will also create 6,000 new jobs this year to cope with ten new store openings and ten store extensions.

Bond will also host a customer web chat online at 2pm today, at www.asda.com/yourasda.