Asda, the U.K. supermarket chain owned by Wal-Mart Stores Inc. (WMT:US), forecast a “tough Christmas” after reporting that revenue growth slowed in the third quarter.
Sales at stores open at least a year rose 0.3 percent, excluding fuel, in the 13 weeks ended Sept. 29, compared with a 0.7 percent gain in the prior quarter, the Leeds, England-based grocer said today.
Asda has guaranteed it will be 10 percent cheaper, cut fuel prices and revamped its own-brand labels such as “Chosen By You” to lure customers. The grocer maintained a 17.5 percent market share in the 12 weeks ended Oct. 28, according to Kantar Worldpanel data, while discount chains Aldi and Lidl increased share.
“The market is still very tough; it’s challenging,” Chief Executive Office Andy Clarke said at a press conference in London. “It’s going to be a tough Christmas.”
Job security and higher energy prices are weighing on customers’ minds, Clarke said, while disposable income is unchanged. The CEO called on the U.K. government to scrap or at least delay a rise in fuel duty planned for after Christmas.
J Sainsbury Plc, the U.K.’s third-largest supermarket company, predicted yesterday that the grocery market will be difficult in coming months as food inflation rises and household budgets decline.
Wal-Mart, the world’s largest retailer, today forecast fourth-quarter profit that trailed analysts’ estimates. The company faces threats from discount chains such as Dollar General Corp. and Dollar Tree Inc.
Asda is watching the growth of European discounters such as Aldi and Lidl “with interest,” said Richard Mayfield, chief financial officer of the U.K. chain. The grocer is cutting prices of basic items including eggs and milk and is offering deals priced at 1 pound ($1.59).
“All retailers we compete against are world-class,” so Asda’s strategy is to have the lowest-priced basket of goods, he said.
Asda said sales from multichannel offerings, such as so- called click and collect services, have almost doubled since 2010. Web-based commerce is a “healthy, profitable part” of the business, said Judith McKenna, Asda’s chief operating officer.
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