Asda invested in price reductions and staffing to attract cash-strapped shoppers while accepting a material hit to profit. Quarterly sales fell 0.2% to £5.3bn in the three months to 30 June, a smaller decline than the prior quarter after targeted investments. Convenience store sales at Asda Express rose 8.6% and George fashion sales increased 2.5%, helping overall performance. Retailers face roughly £7bn of higher costs from national insurance changes, packaging levies and a higher legal minimum wage, which has driven inflation and pressured disposable incomes. Asda cut prices by an average 22% on over half its products.
However, Allan Leighton said the supermarket chain was investing to keep a lid on prices to attract cash-strapped shoppers. The UK's third largest supermarket chain, which is at risk of being overtaken by the discounter Aldi, said sales fell by 0.2% to 5.3bn in the three months to 30 June. But that decline was less steep than the prior quarter after the retailer made a material investment in keeping prices down.
Retailers face a 7bn increase in costs this year, according to the British Retail Consortium, after changes were introduced in April to employers' national insurance contributions, packaging levies and the increase in the legal minimum wage. To a degree that's unhelpful, Leighton said, with weak consumer confidence making life harder for retailers as taxes and commodity price rises continue to drive inflation.
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