Asda reports another drop in sales

<p>Price wars in the supermarket sector have been highlighted for a drop in Asda’s sales.</p>

Asda sales figures have been hit once again as the company reported a disappointing performance for the end of 2014.

The supermarket revealed a 2.6 per cent fall in like-for-like sales in the 12 weeks to the beginning of January. This resulted in an overall decline of one per cent over the whole of 2014. It is yet another blow to the supermarket which had been struggling to compete with its rivals and the emergence of discounters.

This latest decline has been caused by increased price wars among supermarkets with Asda citing a "structural shift in the market". The company spent around £300 million on lowering its prices over the course of the past year. Its president and chief executive officer Andy Clarke described the current situation as "one of its most challenging and changeable periods in history".

Mr Clarke continued: "2014 saw an acceleration in the structural shift in the market and whilst we saw it brewing and put the right plan in place to address it – delivering solid wins for our business and keeping the ship steady in a turbulent market, the pace and scale of change has exceeded all expectations."

Asda has outlined a £600 million investment programme which will see it create new stores and jobs throughout 2015. Mr Clarke said that Asda plans to open 17 new stores, refurbish 62 stores and create over 150 new remote Click and Collect sites.

Pressure from discounters

The rise of German discounters Aldi and Lidl has placed significant pressure on the traditional powers within the supermarket. Only Waitrose and Marks and Spencer enjoyed an increase in sales over the Christmas with Morrisons, Tesco, Sainsbury's and Asda reporting disappointing figures for this busy time of year.

While Aldi and Lidl gain market share, the traditional 'big four' have been making cut backs with Tesco announcing that it would be shelving plans to open a number of new supermarkets.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.