Asda has returned to underlying sales growth for the first time in over two years, according to Shore Capital, which described the trend at the supermarket as a welcome stabilisation.
The broker, citing the grocer's second-quarter update, said like-for-like sales excluding fuel had turned positive in the early weeks of the third quarter after a prolonged decline.
Analysts Clive Black and Darren Shirley said the shift marked a positive milestone for a business that has lost sales and market share for much of the decade.
A slow second quarter
Asda reported that ex-fuel like-for-like sales fell 2.3% in the second quarter, covering the April to June period, with same-store food revenues down 1.9%.
Including fuel, total sales rose 0.4% to £6.5 billion in the period, while ex-fuel revenues came in at £5.1 billion.
Shore Capital said the decline, though unwelcome to still be reporting, was no surprise and formed part of an improving trend it had been waiting to see.
Momentum builds in the third quarter
For the seven weeks to 18 August, Asda delivered fuel-inclusive sales growth of 2.1%, with ex-fuel like-for-like sales up 0.2% and same-store food 0.7% higher.
The broker called it the grocer's first positive top-line score in over two years, helped in July by warm weather and the FIFA World Cup.
Shore Capital said the improvement should support morale across a firm that has faced sustained trading pressure.
Still early in the turnaround
Executive chairman Allan Leighton has described the recovery as a three- to five-year programme and characterised the current position as still in the foothills.
The broker noted that the drawn-out Project Future separation had stalled progress, but said management could now focus on more productive initiatives such as availability and efficiency.
Asda gave no update on trading margins, and Shore Capital said the business remained relatively highly leveraged, with profit recovery and cash generation still to come through.
Sector implications
A more stable Asda is less likely to keep ceding share to rivals, Shore Capital said, which it expects to tighten the wider grocery market into Christmas.
The broker added that Asda is pursuing further growth through its Ocado partnership, due to yield benefits in 2027, alongside shelf-edge availability cameras and expansion in convenience and wholesale.
