Asda boss Clarke: Tesco's Christmas recovery 'surprised us all'

The Walmart-owned retailer’s like-for-like sales plummeted 5.8% in the 13 weeks to January 1, while market leader Tesco and fellow big four rivals Sainsbury’s and Morrisons all turned in consensus-busting performances to heap further pressure on Asda.

Its boss Andy Clarke, who had previously dubbed Asda’s 4.7% drop in second quarter like-for-likes its “nadir”, admitted the latest sales nosedive was “not what we forecasted”.

But he insisted that Asda “executed Christmas really well” and said 2015 was “a successful year”, despite posting a 4.7% drop off in like-for-like sales across the wider 12-month period.

Clarke said: “Q4 was softer than even we forecasted. Certainly the recovery of the biggest grocer in the market made a difference. I think it surprised us all, the performance of Tesco in particular. They certainly stepped up in the last quarter.”

He added that the “incredibly challenging” market was exasperated by higher levels of promotional activity, which the supermarket giant had not anticipated.

“At the half year, who would have thought this would happen? I certainly didn’t have a crystal ball to see what might happen within this market,” Clarke said.

“There’s no doubt that the short-term tactics that have been taken by some businesses are going to tempt some shoppers to take advantage of those.

“We’ve got a long-term sustainable strategy and we are confident that in the long term that will win.

“The short-term instability of some of those businesses we compete against, we would suggest, isn’t sustainable.”

Clarke admitted he was “surprised” with the level of promotional activity during the fourth quarter in certain categories, including beers, wines and spirits.

But he said: “Whether that sustainably locks in customers, I would argue that’s not the case. Our research suggests that with short-term stunts like that, you buy a customer for a week and then they start to go back to their normal shopping pattern.”

Clarke conceded that 2016 was going to be “a big year” for Asda as Project Renewal swings into force. The grocer is making sweeping changes aimed at “prioritising investment to better address the fast-changing needs of its customers.”

It has already hit the pause button on its click-and-collect roll-out and pledged to revamp 95 of its larger stores. Clarke said he had also taken “some very tough decisions” to axe about 300 head office jobs and place 5,000 in-store jobs into consultation.

But he warned the changes would not have a significant impact on Asda’s like-for-like sales performance this year.

“In terms of the impact that’s going to have on volume and value, I would strongly suggest that this year, with the level of deflation that’s going to continue in the market, we won’t see a significant change in comparable performance through the course of this year,” Clarke said.

Asked when its like-for-like performance may start to improve, Clarke said: “Crystal balls are something none of us have got the ability to stare into, but what I would suggest is that when we come out of 2016 into 2017, our stability will start to be much more obvious in terms of the way we start turn our performance.

“We are in a position of strength rather than a position of crisis.”