Asda updates on Q2 2024 trading
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Asda’s total revenue, excl. fuel, grew 2% in H1 2024, with like-for-like sales lower by 2.1%
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In Q2 2024 total revenues excl. fuel declined 2.2%, with LFL sales decreasing 5.3%
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Delivered value for customers – Asda’s price inflation was again lower than market in Q2
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Clear and decisive plan to deliver a more consistent customer experience in H2
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Launched £50m store upgrade programme, with 130 stores already receiving a major refresh
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Strong online performance in Q2: George.com sales rose 3.9% and online grocery up 1.4%
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Best start to a George back-to-school campaign: store sales up 88% vs LY in the first two weeks of the campaign, with a sales increase of 13.5% to the end of Q2
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George has held its leading position in back-to-school ranges (excl. footwear) for 11 years[1]
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Loyalty app Asda Rewards has grown to participation in 52% of transactions in just two years
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Continue to deliver Project Future at pace, with key systems live and improved processes
Asda has today announced its results for the second quarter ending 30 June 2024 – with the supermarket setting out wide-ranging plans to deliver an enhanced and more consistent in-store experience for customers in the remainder of H2.
This follows the supermarket reporting a 2.2% decline in total revenues, excluding fuel, to £5.3bn in Q2, with like-for-like sales 5.3% lower. Despite this, Asda delivered total revenue growth, excl. fuel, of 2% in H1, with a 2.1% decline in LFL sales.
The supermarket continued to deliver a strong online performance in grocery and clothing in the quarter. This is alongside its best-ever sales at the start of its Back-to-School campaign, with George’s back-to-school ranges (excluding footwear) having been the market leader by sales volumes and value for 11 consecutive years.
Asda increased online grocery sales – which now account for 18% of its total food revenue – by 1.4% in Q2, as it continues to meet the needs of busy and value-focused internet shoppers.
George – the UK market leader in kids wear and third-largest fashion retailer by sales volumes – grew its online revenues by 3.9% in Q2, as customers continue to respond positively to its outstanding fashion and digital offering. Total George clothing sales decreased 3.9% on a LFL basis, partly reflecting Asda’s strategic decision not to participate in significant promotional activity across the fashion sector.
Asda has also delivered a record start to its back-to-school (B2S) campaign with store sales up 88% vs LY in the first two weeks of the campaign, with a sales increase of 13.5% to the end of Q2. This year George launched its first-ever four-day Early Bird 20% off promotion and a more than £350,000 in additional hours and training for 150 store colleagues to act as ‘Back to School’ champions, helping families choose the right products and sizes for them.
**Mohsin Issa, Asda’s Co-Owner, said**: “*These results highlight a period of robust online performance and a record start to George’s Back-to-School campaign. Despite a challenging retail environment, George.com sales rose by 3.9% and online grocery increased by 1.4%, underscoring our steadfast commitment to delivering quality and value to our customers. Asda Rewards continues to go from strength-to-strength and now accounts for 52% participation in all transactions.*
*“As we move forward, we remain committed to maintaining our value credentials, enhancing the product offer, and executing our long-term growth strategy to build an even stronger Asda for our customers and communities.”*
**Delivering business transformation at pace**
The decline in Asda’s Q2 LFL sales comes amid an unprecedented transformation – the largest in its history. Asda has made significant progress in building a bigger and better Asda – growing from just over 600 shops to 1,200 stores and food-to-go outlets since the current owners took full control in June 2021. This includes launching into the growth markets of convenience with Asda Express and foodservice, as well as a successful loyalty app, Asda Rewards.
At the same time, Asda also continues to deliver Project Future at pace. Europe’s largest IT transformation project, Project Future includes changes to 2,500 systems across every part of the business to deliver a cloud-based infrastructure and a step-change in Asda’s data capabilities and customer experience to drive competitive edge.
The sheer scale of this programme and additional activity, notably integrating two major acquisitions – the majority of EG UK and the 119 Co-op sites – have required significant attention from the business.
Moving forward, the Executive Team has a clear plan to deliver a more consistent experience for customers. In Q2, the supermarket started a £50m store upgrade programme to improve the customer experience across 171 stores, focused on upgrading its superstores and supermarkets for long-term success. Enhancements and refreshes have already started at 130 of these stores.
For the remainder of H2 and beyond, the business is focused on three key priorities: customer satisfaction, enhanced product availability and a renewed trading plan.
First, the supermarket will increase its focus on, and invest in, enhancing availability across all categories, including 1,000 core grocery lines most important to customers. Asda expects to deliver material efficiencies to make replenishment processes easier, allowing more deliveries to be put straight to shelf.
Second, Asda is investing an additional £30m in colleague hours – to ensure a strengthened customer proposition. This investment will improve the replenishment of stock during opening hours in store; increase the number of colleagues on checkouts at the weekend; and provide a more effective cleaning programme in stores.
Third, Asda will deliver a renewed trade plan for the remainder of H2. A key focus of this will be driving increased use of Asda Rewards, the supermarket’s successful loyalty app that has grown to account to 52% of all transactions inside two years. In Q2, customers continued to respond positively to the popular loyalty scheme, now with over six million regular users (3 million weekly) and participation growing on a quarterly basis. Asda has also launched Rewards ‘clubs’, such as the Baby & Toddler club.
**Michael Gleeson, Chief Financial Officer at Asda, said**: “*We continue to make progress by investing in bringing our quality and value offering to more customers across the UK, with Asda’s food price inflation trending lower than the market.*
*“We have made great progress over the last few years in transforming Asda into a diversified retail group, much of which is almost complete. However, we also know that there are some areas where we can and need to improve. We have today set out clear and decisive action to deliver a more consistent customer experience – to match the uncompromising value we offer. We remain confident in the underlying strength of the Asda business as we execute our long-term growth strategy.”*
**Desirable and affordable product**
Asda continues to focus on offering uncompromising value – a customer proposition that delivers on quality, price and choice, including across its core grocery lines. The supermarket is committed to an ‘Always Available’ policy on its top 1,000 lines which will mean customers can always access its top products, supported by range simplification.
Its new premium own-brand range, Exceptional by Asda – which aims to champion taste whilst providing shoppers with the very best quality – was launched in May and will be rolled out over 500 products across multiple categories. Exceptional by Asda has proven popular with customers. Sales in the categories where it has replaced previous lines are up by 20%.
The business also announced new price cuts on over 120 products worth £70m in May, reducing prices by an average of 11% at a time when household budgets remain under pressure.
**Stronger presence in growth markets**
Asda completed the conversion of 478 convenience sites acquired from the Co-op and EG UK to Asda Express in Q2, and the retailer is set to open an additional 11 Asda Express convenience stores by the end of the year. These stores will bolster Asda’s presence within inner city locations, bringing Asda’s heritage in uncompromising value to more communities.
**Delivering the tech foundations for future success**
In this financial year a key deliverable for Asda is the implementation of Project Future. So far, the supermarket has:
· Built Asda’s own front-end from scratch, adding brand new touch screens and scanners, and updating software on more than 16,500 tills at 612 stores, making things much quicker and simpler for our colleagues and customers.
· Delivered 27,888 Scan & Go devices across 363 stores.
· Rolled out Store Assist across 534 stores: processing average of 4m items daily across c.75,000 orders with more than 26,000 colleague trained and 10,000 devices upgraded.
· Moved all our distribution depots to new systems – in just nine months.
· Switched across finance and payroll systems.
· 60+ stores now have Store Parcel Kiosk.
Asda is confident that, as part of its transformation journey, Project Future will deliver a significantly stronger business that all stakeholders will benefit from enormously.
**Stable net debt with positive cash delivery**
The supermarket’s total net leverage as a multiple of pro forma EBITDA after rent remained stable in Q2 2024 at 3.0x. Asda’s net debt at the end of Q2 was £3.9bn – and the business remains fully committed to further deleveraging.
[1] Kantar 12-week data ending Mid Sept each year (children’s clothing and accessories ‘purchased for school’)