Asda Stores Ltd is expected to prioritise the reduction of its debt pile over the growth of its sales and market share, analysts at Shore Capital believe.
Sales at the supermarket lifted by 1.4% on a like-for-like basis during the first quarter of 2024, a figure which is “relatively poor”, according to analysts at the London broker.
However, the private-equity-owned group isn’t believed to be focused on sales league tables and market share but is instead targeting the “generation of profitable transactions”.
To boost this area, Asda is required to grow its margins and cash flow, something analysts believe is going well.
Yet, for the company to improve its margins it must overcome a fall in volumes, which Shore Capital believes can be grown through price rises and cost-cutting.
Analysts said: “Asda’s approach brings risk, as sustained share loss dilutes buying capability and leads to the risk of negative operational gearing.
“Whilst so, Asda approach, for now, is both working and benign for the wider UK grocery sector.”
Shore Capital noted Marks and Spencer’s full-year results on Wednesday, predicting that it will highlight market share gains in the report.