As discounters Aldi and Lidl continued to eat away market share from the UK’s biggest supermarkets, Asda posted a drop in 2016 profit and said its sales performance missed expectations.
Britain’s third largest supermarket chain, owned by US retail giant Wal-Mart Stores Inc (NUSE:WMT), reported an 11.5% decline in full year underlying operating profit to £1.08bn.
Revenue edged down 3.2% to £21.7bn with like-for-like sales falling 5.7%.
Asda - like the rest of the so-called ‘Big Four’ UK supermarkets, including Tesco plc (LON:TSCO), J Sainsbury plc (LON:SBRY) and WM Morrison Supermarkets plc (LON:MRW) – has been hit by the growing popularity of Aldi and Lidl.
Asda has been one of the worst affected and has admitted that it has been too slow at repositioning its business in response response.
"The grocery market has continued to experience low growth throughout the year and competition in the sector has remained intense. Our sales performance, relative to the market, was behind our expectations," the company said.
Following changes it made to its product ranges and prices, Asda saw an improvement in the fourth quarter under new chief executive Sean Clarke.
Since replacing Andy Clarke as boss a year ago, Sean Clarke has decided to cut prices of everyday items at the supermarket to lure customers on a budget.
The strategy has seen some success, with the rate of decline in Asda’s sales slowing to 2.8% in the first quarter, compared to 2.9% in the previous three months.