Asda

Financial overview

• Total group sales rose 4.7% to £25.62bn in FY2023, with growth in retail sales partly offset by a decline in fuel sales
• Retail sales excluding fuel increased 7.1% to £21.90bn
• Like-for-like sales excluding fuel up 5.4%
• Online operation estimated at £3.70bn in 2023 - 16.9% of total retail sales
• Some profit recovery in FY2023 after profitability had come under pressure from soaring inflation and ongoing investments in price 
• Asda Stores Ltd was only marginally profitable at the operating level in FY2022 and swung back into the red at pre-tax level
• For latest financial results, click here

Total revenue including fuel edged up 0.7% to £24,630.8m at Asda Stores in the year to 31 December 2023 (FY2023), up from £24,461.7m the previous year.

An overall decline in fuel sales was offset by growth in retail sales, with retail sales excluding fuel increasing 5.8% to £21,616 in FY2023, compared to £20,436 the year before.

Sales growth was restored on a like-for-like basis, climbing 5.4% against a 0.2% LFL decline in FY2022.

Following a “more challenging trading environment” in FY2022 impacted by inflationary and cost-of-living pressures, Asda said it “performed strongly” in FY2023.

Its performance in the first half of the year was “particularly strong”, while there was “more modest growth” in the second half of the year partly because of unseasonable weather during the summer and autumn.

Separately from the Companies House Asda Stores Limited and Asda Group Limited filings, Asda had earlier reported that sales excluding fuel grew 7.1% year on year to £21.90bn in FY2023, from £20.45bn the previous year, as it continued to focus on growth.

Approximately 86% of Asda sales excluding fuel were grocery sales in FY2023, with the vast majority of the rest in George clothing and general merchandise.

Food sales increased 7.1% year on year in FY2023, while fuel sales declined 7.6% year on year.

Online sales accounted for 16.9% of total sales in FY2023, up slightly from a 16.2% share the previous year.

Adjusted EBITDA after rent increased 24% year on year to £1.08bn.

Profit analysis

Asda’s efforts to support customers by investing in price and quality and ‘maintain its position as the cheapest traditional supermarket’ has taken its toll on the bottom line.

However, the grocer swung back into the black at operating and pre-tax levels in FY2023. An increase in operating profit to £514m in FY2023 from a loss of £677.9m in FY2022 was “primarily due to impairment reversals of £352m in FY23 [FY2023] compared to impairment charges of £698m in FY22 [FY2022] (restated), and an increase in sales and recovering margins post significant investment in our proposition in 2022”.

Increased spend relating to Project Future (the company’s project to move from Walmart IT systems to standalone IT systems) also had an impact on profitability in FY2022.

Asda’s profitability has fluctuated in recent years and the grocer moved back into the black at pre-tax level in FY2023, posting a pre-tax profit of £217.4m against a £916.4m loss the year before.

 

 

In FY2021, profit had benefited from a £63.1m gain on sale-and-leaseback deals and an increase in financial income of £86.0m.

Profits had been under pressure at Asda for some time as the grocer has continued to invest in pricing in a bid to drive flagging sales.

During the 2022 financial year, Asda acquired Arthur Foodstores Ltd (129 convenience store with petrol forecourts) and in FY2023 acquired Euro Garages (Jersey) Ltd as it continues its development as a “leading convenience food brand”.

Market share

Asda and Sainsbury’s have been jostling for second position in the grocery market for a long time, although Sainsbury’s has had the upper hand of late according to recent Kantar data. Indeed, Kantar’s data has revealed that Asda’s market share has been coming under pressure recently on the back of a weak performance. In mid-2024, Asda chair Lord Stuart Rose said in an interview with the Daily Telegraph that he was “embarrassed” by the grocer’s slipping market share and, in September 2024, it was reported that co-owner Mohsin Issa would step back from running Asda, with Rose and Rob Hattrell, an executive at TDR, taking over day-to-day responsibilities at the supermarket.

Ecommerce sales performance

Ecommerce sales for Asda are Retail Navigator estimates.

Asda’s online sales participation (sales through online and click-and-collect channel) was 16.9% of sales excluding fuel in 2023, up from a 16.2% share the previous year.

Total retail sales excluding fuel (as detailed in the Asda Group Limited Companies House Filing) were £21,898m in FY2023, which suggests online sales of around £3,700m.

Prior to FY2023, Asda provided online as a share of food-only sales, whereas from FY2023, online sales comprise Asda.com grocery sales and non-food sales via George.com. Therefore, online sales from FY2023 are not directly comparable to previous years.

Asda said that online sales had stabilised in FY2022 and that total online sales for the full year were slightly lower than the prior year and lower as a proportion of total sales, “as more customers returned to shopping in store”.

Ecommerce sales had soared in 2020 as consumers turned to online shopping during the pandemic. The grocer reported that online sales more than doubled over the three months to end-June 2020, while online click-and-collect orders quadruped over the same period due to the changes in consumer behaviour brought on by the health crisis.

Stores financial analysis

With sales growth temporarily restored, a five-year run of declining sales densities (sales per sq ft) was halted in 2018 when sales densities edged up to £870/sq ft or so according to Retail Navigator estimates.

The improvement was short lived, however, as densities moved down again to £860/sq ft in 2019 according to Retail Navigator estimates before falling back to just £835/sq ft in 2020 as store footfall fell in the pandemic. Bolstered by customers returning to stores, sales densities recovered over FY2021 and FY2022 to an estimated £865/sq ft in 2022.

The opening of a raft of convenience stores through the acquisition of the majority of EG Group’s UK business and Arthur Foodstores Limited (“comprised 129 convenience stores with petrol forecourts attached, a carve-out from the Co-operative Group”) helped propel Asda’s total stores and food service site number to 1,200 in FY2023 from 633 in FY2022, which saw a surge in its sales area for FY2023.

In its annual report for FY2023, Asda said: ”Across both acquisitions we have converted 470 stores, taking our convenience portfolio from three to almost 500 stores in the space of six months.”

The acquisitions are key to Asda’s plans to “significantly step up the roll-out” of its Asda Express convenience stores. In November 2023, Asda opened its 100^th Asda Express store, following the speedy rollout of Co-op and EG Group conversions.

Retail Navigator estimated that sales densities came in at around £760/sq ft in FY2023.

Current financial year

Q3 FY2024

Asda total group revenues excluding fuel edged up 0.5% for the year to 30 September 2024.

Total revenues in the third quarter excluding fuel fell 2.5% to £5.3bn, while like-for-like sales were down 4.8%, which the grocer said was an improvement on the previous quarter of the same financial year.

Rose said: “We have undergone the largest transformation in our history during the last three years – doubling our store footprint, expanding into strategically important growth markets of convenience and food-to-go, and overhauling our digital capabilities. We have laid solid foundations to drive long term growth, but the unprecedented scale of these changes has absorbed a huge amount of the leadership’s time with a temporary impact on Asda’s customer experience in stores.

“As a key priority, we have been investing further and taking the right decisions to deliver an enhanced and more consistent in-store experience for our customers, as we set out in our Q2 results in August.”

The retailer hailed a “continued market outperformance” from its George clothing range and a “phenomenal response” from customers to its new Exceptional premium lines.

Q2/H1 FY2024

Asda total revenue excluding fuel edged up 2% year on year for the first half of the financial year ending 30 June 2024 (H1 FY2024) amid a “challenging retail environment”, with like-for-like sales dipping by 2.1%

Total revenues excluding fuel for the second quarter to 30 June (Q2 FY2024) slipped 2.2% and like-for-likes fell 5.3%. The retailer said: “The decline in Asda’s Q2 like-for-like sales comes amid an unprecedented transformation – the largest in its history.”

It also claimed it has a “clear and decisive plan” to provide a “more consistent customer experience” in the second half of the year.

As of August 2024, 130 stores of a planned 171 had undergone a significant refresh as part of a £50m store upgrade programme.

Asda hailed a robust online performance in Q2 with George.com sales up 3.9% and online grocery increasing 1.4%.

Asda co-owner Mohsin Issa said: “These results highlight a period of robust online performance and a record start to George’s back-to-school campaign. Despite a challenging retail environment, George.com sales rose by 3.9% and online grocery increased by 1.4%, underscoring our steadfast commitment to delivering quality and value to our customers. Asda Rewards continues to go from strength-to-strength and now accounts for 52% participation in all transactions.

“As we move forward, we remain committed to maintaining our value credentials, enhancing the product offer, and executing our long-term growth strategy to build an even stronger Asda for our customers and communities.”

Q1 FY2024

Asda total revenues excluding fuel grew 6.6% year on year to £5.3bn for the first quarter of FY2024 (Q1 FY2024) ended 31 March 2024, driven by George and investment in value. Like-for-like sales were up 1.4%.

George clothing revenues climbed 3% year on year to £293m and 3% on a like-for-like basis, while homewares sales rose 11.7%.

Asda said that post Q1 it had refinanced more than £3.0bn of debt “strengthening its capital structure into the next decade”.

Online grocery accounted for 18% of food sales, with a 5.6% uptick in the number of average weekly orders in Q1.

Mohsin Issa said: “Asda made good progress against its strategy in the quarter, laying the foundations for long-term success – including completing the conversion of our newly acquired sites to Asda Express, as part of our strategic expansion into the growth markets of convenience and food-to-go. We did this while continuing to deliver great range, value and convenience, including investing in lower prices and the quality of our food and non-food at a time when the household budgets of our customers remain under pressure.

“George at Asda again outperformed the value market in fashion and homewares, and it is very encouraging to see our investment in the brand bearing fruit both online and in stores.”

Employees

Asda has made regular rounds of job cuts across the business over the past few years as management takes steps to simplify the shopping experience and drive operational efficiencies.

Reflecting its ongoing efforts to cut costs, the headcount at Asda Stores was reduced by around 20,000 to just over 141,000 over the five years to 2020. While the following year saw a slight rise in headcount to more than 143,000, the total was brought down again to just over 141,000 in 2022 and to almost 136,000 in 2023.

Overall sales per employee across Asda Stores have continued to rise steadily and came in at more than £170,000 in 2023.

Asda Stores staff costs to sales ratio had been hovering at around the 11% mark for several years but increased by a full point to 12.3% in the difficult 2020 financial year following an 8.1% increase in staff costs. The ratio has been brought down again subsequently as trading has normalised following the pandemic but moved up again slightly to 11.7% in 2023.

Forecast

Asda stated that it expects the UK food and non-food markets to remain resilient in the current financial year, with inflation returning to nearer historical norms during the year.

However, it admitted that customers are likely to continue to feel the impact of cost pressures on their household budgets.

Asda will continue to focus on its value offer, which will be supported by its expansion within convenience “whereby we can offer value to a greater number of communities in new locations”.

Asda sales should continue to rise in low single digits over the five years to 2028. Growth will be driven by its ecommerce business, where ongoing investment in infrastructure is expected to continue to bolster sales, while its convenience market is also set to strengthen following the recent acquisitions and organic growth. By 2028, Retail Navigator expects online sales to account for around 16.4% of total Asda sales of the order of approximately £29.4bn.