Asda shrugs off Brexit uncertainty as sales growth accelerates

Asda’s like-for-like sales grew at a faster pace last year than in 2017 - up 1.6% compared with 0.5%, its annual report reveals.

Pre-tax profit grew 6.7% from £666m to £710.4m on group revenues up 3.1% to £22.9bn. Operating margin increased by 9.2% compared with a 13% decrease the previous year.

The Walmart-owned retailer said it had achieved a second consecutive year of positive like-for-like sales growth against the backdrop of a highly competitive market.

The continuation of its low-cost operating model combined with “fixed cost leverage” had resulted in a 9.2% increase in operating profit from £735.4m to £803.2m.

Asda, through its programme of targeted price investment on key lines, had helped mitigate the impact of food inflation on its customers, according to the strategic report posted at Companies House.

Fresh food availability had improved as a result of changes to its supply chain and store processes.

Asda said sales in its online business had grown ahead of the market and improved customer service and developments to the website, mobile and tablet apps had made it easier and faster to shop online.

The group’s wholly-owned subsidiary, International Procurement & Logistics, which sources fresh produce, wine, chilled products, ambient produce, flowers and plants directly from growers and manufacturers for Asda, continued to deliver savings.

Capital expenditure during the year focused mainly on replacing “essential assets and refreshing the estate”.

The report said: “We remain focused on helping our customers to save money and live better through finding innovative new ways to improve our offer in store and online.

“Through the low-cost operating model, we continue to generate cost savings which enable us to invest further in price, quality and service to customers.

With regard to Brexit, Asda said it had a “cross-functional working group” in place, whose main objective was to manage the impact on the group and minimise disruption to its customers by protecting availability of key imported products, including the use of extra UK ports.

It had also considered the potential tariff impact and customs regime in relation to product imported form the EU and had plans in place to reduce risk.

Rob McWilliam, Asda’s CFO, said: “The challenges faced in the market during 2018 have only intensified as we move through 2019 and we remain steadfast in our approach to win on price, deliver a consistent customer experience and drive growth where customers care.