Asda turnaround driven by lower prices and better product availability

Asda’s chairman, Allan Leighton, has highlighted significant progress in the retailer’s ongoing turnaround efforts, pointing to improvements in product availability and competitive pricing strategies. Despite challenges, the supermarket giant is seeing early signs of a recovery, described as “green shoots” in its fight to regain customer trust and market share.

In the four months to the end of April, like-for-like sales fell by 3.1 per cent, but this marked a 1.1 per cent improvement on the previous quarter. Total revenue, excluding fuel, dropped by 5.9 per cent to £5.8 billion. For May, the retailer saw further gains in performance, suggesting its recovery plan may be starting to take effect.

Leighton, who was brought in as executive chairman towards the end of last year, stated that product availability has risen from 90 per cent to 95 per cent since January. Pricing has also become more competitive, with over 10,000 items now marked with reduced “Asda Price” labels. This move has created a 3 to 6 per cent price advantage compared to traditional full-service rivals.

Central to the company’s strategy is a £1 billion “war chest” to support a rollback pricing model. While it has sparked fears of a potential price war with competitors, including Tesco, Leighton views competition as beneficial for consumers. He believes this focus on value pricing will position Asda as the most affordable supermarket in the UK, including against discounters Aldi and Lidl.

The turnaround effort builds on Asda’s plan to reconnect with customers, a relationship that has suffered in recent years due to food shortages, poor innovation, and declining service standards. Leighton admitted the company has lost both customer and colleague trust but described the recovery measures as being on track. He projected the process to take between three and five years.

Key drivers during the turnaround have included sales growth within Asda’s fashion brand George, which outperformed the broader fashion market with a 3.5 per cent increase in like-for-like sales. Similarly, Asda Express convenience stores have seen solid performance following the integration of 469 sites acquired from The Co-op and EG Group, recording a 6 per cent rise in like-for-like sales.

Leighton dismissed claims that Asda’s private equity ownership by TDR Capital and the Issa brothers is to blame for its poor performance, instead attributing setbacks to short-term strategies and a lack of effective turnaround planning. With net debt standing at £3.8 billion, he emphasised that creating a strong mid-term plan is essential for recovery. “The nation has always had an affinity with Asda,” Leighton remarked, adding optimism that the supermarket can rebuild its reputation and thrive once again.