Asda, Britain’s third biggest supermarket chain, has seen its sales rise for the fourth consecutive quarter, but price promotions ate into its profits.
The US-owned retailer, which is readying itself for a blockbuster merger with larger UK rival Sainsbury’s, booked a 3.4 per cent increase in like-for-like sales in the three months to the end of March.
Taking out the benefit of an early Easter, sales grew 1 per cent on a like-for-like basis, but the figures represent a year of positive sales growth.
Gross profit fell year-on-year, which the group put down to its investment in price reductions and the early Easter timing forcing it to alter its sales mix.
Online grocery sales were up 8.3 per cent in the latest quarter, with sales from George.com jumping by 21.9 per cent.
The chain has been leading a turnaround in an attempt to improve sales amid a long-running supermarket price war, triggered by the onslaught of German discount operators Aldi and Lidl.
Asda boss Roger Burnley said: “During the first three months of the year, we have continued to invest sensibly where it matters most to our customers with lower prices, innovation in our own brand and further improving their shopping experience whether in store or online.
“Whilst we are not complacent, we are positive about our growing momentum and excited by the opportunity that our proposed merger with Sainsbury’s offers to accelerate our successful strategy and go further, faster.”
Walmart-owned Asda is on course to merge with Sainsbury’s in a £12 billion deal, which will allow it to further invest in lower prices.
Sainsbury’s chief executive Mike Coupe has claimed that the tie-up – creating a combined business larger than Tesco in terms of market share – will produce £500 million in cost savings.
Consumers have been promised cheaper everyday items, although it is not yet known where the price cuts will fall.
The Competition and Markets Authority is scrutinising the deal and it is expected that scores of stores will have to be divested as part of the competition review.
Asda has also been cutting jobs in the UK, including at its head office in Leeds, as part of a sweeping cost-cutting programme.
Sainsbury’s recently reported a return to underlying profit growth and a modest rise in like-for-like sales.
The group pointed to a “good” food performance with transactions growing ahead of the market and an “improving margin trend”.
General merchandise and clothing, including sales from the Argos catalogue business acquired in 2016, continue to “outperform a challenging market”, the firm added.
Results for the 52 weeks to 10 March revealed an underlying profit before tax of £589m, up 1.4 per cent from the £581m posted a year earlier. There was a second-half profit increase of 11 per cent.
Group sales, including VAT, rose 9 per cent to just over £31.7bn, with like-for-like sales, which strip out store openings and additional selling space, nudging up 1.3 per cent.
The group delivered £185m in cost savings during the year, driven by synergies linked to its integration of Argos.