MARKETS: Value ranges drive strong Q2 growth at Asda

Value ranges drive strong Q2 growth as Asda

Supermarket Asda posted like-for-like sales growth of 9.6% to £5.4bn (excluding fuel) in its Q2 results for the 3 months to June 30, compared to the same period last year, buoyed by a focus on low prices and value ranges.

Like-for-like sales were also up 1.8% on the previous quarter, due to its “continued focus on supporting families during the cost-of-living crisis,” the retailer said. 

Quality investments in key own-label categories drove 14.7% Q2 sales growth year-on-year, as cash-strapped consumers continued to hunt for bargains.

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Just Essentials, Asda’s value range (which launched last year specifically to help families shop on the tightest budgets), is now firmly established as the number one value range in the market with 20.2% market share, Asda revealed, and sales during the quarter rocketed 87% year-on-year. 

The retailer said more than 22m customers have now bought Just Essentials products since the range launched in May 2022.

And with the latest Asda Income Tracker showing that 40% of UK households had negative disposable income across the quarter – meaning their take home pay did not cover spending on bills or essentials – Asda said it has redoubled its value initiatives to provide extra support for customers during the quarter.

Asda co-owner, Mohsin Issa, said: “We know that thousands of families continue to struggle with the cost of living, and we’re committed to doing all we can to support them. This quarter, we have locked the price of over 500 everyday items to help families keep a handle on their budgets, as well as reducing the price of over 200 own–label items by an average of 9% – including fresh fruit, vegetables, cupboard staples and ready meals.”

Food inflation rockets

The price of food and non-alcoholic beverages has soared over the last year, peaking at 19.2% in March, which was the highest annual inflation rate for over 45 years, according to the ONS consumer price index. But has been steadily decreasing since, easing to 12.7% last month.

Higher food prices, combined with spiralling energy costs, interest rate rises and increasing prices elsewhere, hit lower income families particularly hard, prompting a ‘cost-of-living crisis’ which refers to the fall in ‘real’ disposable incomes (adjusted for inflation and after taxes and benefits) that the UK has experienced since 2021.

Asda also updated investors on the performance of its George, General Merchandise (GM) and Online Grocery divisions during the second quarter. Both its clothing and GM business outperformed the wider market during Q2, with like-for-like sales growth of 2.8% and 6.3% respectively compared to the same period of 2022. 

Staff retention & recruitment

Recruiting staff continues to be a challenge for the retail and hospitality sectors. But in response, Asda said it has invested £141m in pay increases to retain and incentivise employees.

In April, Asda increased pay for its 123,000 hourly paid retail staff to £11 per hour, with a second increase to £11.11 given in July.

Michael Gleeson, Asda’s Chief Financial Officer, said: “As well as investing to support the immediate needs of our customers and colleagues, we continue to invest in driving the long-term sustainable growth of our business in areas like loyalty and convenience. 

The integration of 119 stores acquired from Co-Op is now underway and the completion of our acquisition of the EG UK&I estate is on track to complete in Q4– allowing us to bring Asda’s value in fuel and groceries to even more communities,” he adds.

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Emily Seares

Emily Seares has over 15 years of experience as a journalist and editor, specialising in fashion, retail, luxury, and business transformation. She is regularly by-lined in national newspapers and magazines and has an extensive network of industry contacts. Emily has spoken at international conferences, provided live interviews as a fashion expert on the BBC, and delivered regular lectures at a prestigious British university. She has received recognition for her contributions to the industry and was honoured in British VOGUE's Powerlist Top 100.

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