Asda's recent trading “is clearly far from where it would wish it to be” and “the performance is, frankly, poor”.
That is broker Shore Capital Markets’ blunt takeaway of the private equity-owned supermarket chain, which saw notable grocery volume loss whilst ceding market share in the second quarter.
Excluding fuel, Asda’s like-for-like sales fell by 5.3% year on year, though online grocery was a bright spot with sales up 1.4% year on year.
Asda’s management spoke of “delivering business transformation at pace”, although Shore Cap suggested that senior management changes may be needed to achieve this.
All is not lost for Britain’s third-largest supermarket though, with analysts highlighting “the evolving shareholder register”, with TDR Europe, now owner of around 67% of the equity, “a very capable long-term house”.
“Hence, whilst no doubt also dissatisfied, we do not sense panic, we do anticipate necessary senior management change and although clicking fingers will not deliver necessary improvement, we would not be surprised if Q2 represents the nadir of Asda's recent trading momentum,” said Shore Cap.
The story is not uniform across the whole grocery sector though, with Shore Cap noting “ongoing warmth in Marks & Spencer, Sainsbury's, and Tesco, which are showing “good free cash generation in the relatively sound and settled trading environment”.
“Each of these three listed players has commendable share gains with very little space gain,”analysts added.