Asda full-year profits rise but sales slump amid fierce competition

The supermarket giant’s pre-tax profits climbed 5.9% to £974.9m in the year ending December 31, 2015 as the Walmart-owned grocer focused on protecting its bottom line.

That strategy was also reflected in its operating profit, which advanced 3.3% to £1.05bn.

However, Asda’s market share plunged during the year after like-for-like sales fell 4.7% across the 12-month period, as the green shoots of recovery displayed by Tesco and Morrisons over Christmas and the ongoing growth of the discounters hampered its performance.

According to documents filed at Companies House today for Asda Group Limited, the retailer’s revenues slipped from £23.2bn in 2014 to £22.4bn last year as customers flocked to its grocery rivals.

But the grocer grew profits during the year after slashing its overheads. Asda’s employment costs fell 2.2% to £2.3bn after the business cut 8,668 roles across its head offices, stores and distribution centres.

The supermarket giant also streamlined its senior leadership team, driving total salaries of top executives down from £6.2m to £4.6m.

A separate filing for Asda Stores Limited - which only includes the grocer’s retail operation and excludes divisions such as property and financial services - revealed that pre-tax profits climbed 5.2% to £633.3m during the same period.

Revenues slipped 4.5% from £23.1bn to £22.06bn. 

Sales have continued to fall away since the year end, prompting Walmart to make sweeping changes to Asda’s leadership team in a bid to rejuvenate the struggling business.

Sean Clarke has been parachuted in from the retail Goliath’s Chinese arm to replace Andy Clarke as boss, while chief customer officer Andy Murray joined from Walmart’s US business.

The duo are focusing on breathing new life into Asda’s larger supermarkets and revamping its own-label proposition as it strives to win shoppers back from Aldi, Lidl and its big four rivals.

Its like-for-like sales nosedived 7.5% in a nightmare second quarter of 2016 – the first trading update since Clarke took the helm – emphasising the size of the task at hand.

Asda has also poached Sainsbury’s retail and operations director Roger Burnley, who takes over as deputy chief executive and chief operating officer next month, while Lidl chief operating officer Chris Walker is also poised to join as vice president of supermarkets.

During Walmart shareholders week – which was attended exclusively by Retail Week – the retailer’s international boss Dave Cheesewright admitted he was “very disappointed” with Asda’s performance and insisted the grocer would shift its focus from protecting profits to protecting market share.

That put the UK grocery sector on red alert, with Asda understood to be preparing a fresh wave of price investment before Christmas.

However, Asda revealed at its last update that it will not spend more than the £1.5bn that had already been allocated to invest in price across a five-year period.