Supermarket Asda has suffered a third quarterly sales dip in a row amid what its boss describes as the “most challenging year yet” for UK grocers.
The food retailer, the UK arm of US giant Wal-Mart, reported a 3.9% fall in like-for-like sales for in the 15 weeks to 19 April.
That’s an increase in the pace of the sales decline seen in the fourth quarter of 2014, when Asda’s like-for-like sales dropped by 2.6%.
Asda, which ranks second among UK supermarkets in terms of annual revenue behind Tesco (LON:TSCO), has struggled to maintain its market share amid increasing competition from German discounters Aldi and Lidl.
All of the so-called "big four", Tesco, Asda, Sainsbury's (LON:SBRY) and Morrisons (LON:MRW), have cut prices and tried to improve their stores and service to hold onto customers.
Meanwhile, the traditional players have also had to deal changing consumer habits, with many shoppers buying online or making more frequent visits to local convenience stores.
Food deflation is adding to the woes and grocery prices also fell 2.1% in the 12 weeks to April 26, according to recent Kantar Worldpanel data.
Asda’s chief executive Andy Clarke described the last quarter as “unprecedented”.
“We have seen deflation in the market and exponential shifts in the industry,” he said, adding that 2015 is setting itself up to be the “most challenging year yet” for traditional supermarkets.
Asda was the first of the big four to lower prices, saying in November 2013 it would spend £1bn pounds on cuts over five years.
In February, Asda said it would invest an additional £600mln in expanding and improving stores this year.
It also stopped issuing money off vouchers over a year ago, calling them short-sighted "gimmicks".
Clarke admitted today that rivals' changes had hurt Asda's business in the short term, but he backed its long-term plan.
“Whilst I take no pride in reporting a negative number, we are in a period of expected turbulence, not distress. We won’t buy short term sales at the expense of long term profitability.”
Meanwhile, shares IN Asda’s parent company Wal-Mart, the biggest US retailer, lost 3% to US$77.60 early on after it reported a 7% fall in first-quarter net income to US$3.34bn (£2.16bn) as higher wages and a stronger dollar pushed profit down.