Asda’s finance chief has insisted its Aldi and Lidl price match scheme is working, despite the supermarket losing market share while Lidl grows faster than any other bricks & mortar grocer.
Combined with other steps to improve Asda’s value proposition, such as rounds of price cuts, the matching scheme had “helped limit some of the more recent impact of the combined Lidl and Aldi [market] share”, Michael Gleeson claimed.
Asda became the first supermarket to target both Aldi and Lidl with a price-matching scheme in January, initially on 280 products. It was subsequently expanded to 400 lines in April.
Presenting a quarter one trading update, Asda CFO Gleeson said: “I think if we look over the last two years or so, all of the traditional big four collectively have done a good job and a better job of addressing entry price position.
“In 2022 we significantly reformulated our Just Essentials entry price point range and have invested heavily in that, more than doubling sales.
“And that led into the early part of 2024, where we introduced that Aldi and Lidl price match.
“I think if you look at the Kantar market share over the last couple of years, it’s true Lidl have done better over the last seven months [but] the combined share of both discounters, their relative outperformance, has significantly declined and actually Aldi have underperformed the market in the last couple of quarters for the first time in 15 years or so, outside of Covid.”
He added: “We absolutely believe in this [price matching] initiative. It builds on what we’ve done on Just Essentials throughout 2022 and we’re confident it is the right thing to do.”
Lidl’s sales were up 9.1% year on year in the 12 weeks to 14 April, according to Kantar, making it the fastest-growing bricks & mortar supermarket for the eighth month in a row and putting its market share at a record-high 8%. Its Lidl Plus loyalty app has been credited by experts with helping its sales climb faster than Aldi’s, whose growth had slowed to 2.8% in the same 12-week period, behind the total market’s 4.3%. Aldi’s market share stands at 10%, down from 10.1% a year ago.
Asda has performed well behind both discounters, with its sales contracting by 0.4% in the 12-week period according to Kantar, to puts its share at 13.4%, down from 14% a year ago.
Gleeson said there was “ebb and flow” in market share. “If we look into the latter part of 2022 into the early autumn of 2023, we were at least performing in line with the market and on occasions outperforming it,” he said.
“I think it is true to say that we will have had a market share loss over the last six months or so. But in the context of the longer periods, I think it does ebb and flow. We are lapping harder comparisons, and we are determined and confident, determined to do the right thing. And the confidence to be able to do that is reflected in that Lidl and Aldi price match.”
Asda said it had also commenced a £50m upgrade programme to improve the customer experience across 173 stores, focusing on its superstores and supermarkets.
This investment would see 50 of its highest-performing stores receive major upgrades as part of an enhancement programme, it said. A separate refresh programme would see enhancements across another 123 stores.
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Asda’s total revenues, excluding fuel, were up 6.6% to £5.3bn in the quarter ending on 31 March, according to the trading update. Like-for-like sales were up 1.4%.
The performance benefited from a “particularly strong contribution from George at Asda, which outperformed the fashion and homewares markets during the quarter”. George grew its total clothing revenues by 3% to £293m and 3% on a like-for-like basis, as customers responded to investment in price, according to the business.
Online grocery also continued to perform well – representing 18% of food sales – driven by a 5.6% increase in the number of average weekly orders.
Along with the launch of the Aldi and Lidl price match scheme, other steps to boost Asda’s value position in grocery have included a £70m round of price cuts.
The quarter saw Asda complete the conversion of around 470 convenience sites acquired from Co-op and EG UK to Asda Express, increasing its total store estate to over 1,200 sites, the largest in its 59-year history.
“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,” said Asda co-owner Mohsin Issa.
“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. Customers also responded positively to our ongoing investment in the Asda Rewards loyalty scheme, which now has around six million regular users, and online grocery where we are firmly established as the number two player in the market.
“I want to sincerely thank all of our colleagues for their hard work over the quarter, as we remain committed to doing the right thing by them, our customers and the local communities which we serve.”
Gleeson said: “Building on our strong full-year performance, today’s results are further evidence of the underlying strength of the Asda business. During quarter one, we continued to help customers manage their household budgets by providing uncompromising value on food and non-food ranges.
“It was pleasing to see our investment in further enhancing the quality of our food, Aldi and Lidl price match, Asda Rewards, and George at Asda resonate so strongly with customers.
“Since the shareholder group acquired the business in June 2021, they have invested more than £3.5bn to grow the business organically and via strategic acquisitions and a further £800m to replace legacy Walmart IT infrastructure with new bespoke Asda systems.
“This has transformed Asda into a diversified retail group, with a significant presence in the fast-growing convenience and food-to-go markets. A key focus now is to invest in enhancing the customer experience in our larger supermarkets and superstores having done the heavy lifting converting acquired convenience stores to Asda Express.
“Earlier this month, we completed a significant refinancing, extending most of our debt obligations into the next decade following strong demand from investors. This provides us with a robust and stable capital structure and the capability to continue investing to deliver our ambitious long-term growth plans.”
The supermarket refinanced more than £3.0bn of debt, with the strengthened capital structure recognised by both Moody’s and Fitch ratings agencies in their recent upgrade of the Asda business, the trading update said.