Brexit hits UK grocer Asda

Brexit hits UK grocer Asda

Asda, the British supermarket arm of US retail giant Walmart (WMT N), said uncertainty surrounding Brexit was affecting its customers as it eked out a small rise in second quarter sales, helped by the later timing of Easter this year.

Britain’s new prime minister Boris Johnson has threatened to take Britain out of the EU by October 31, with or without a deal, setting the scene for a showdown in the UK parliament where MPs are opposed to a divorce without a transition agreement.

Asda, whose proposed takeover by rival Sainsbury’s for €8.2bn was blocked by Britain’s competition regulator in April, said its like-for-like sales rose 0.5% in its the three months to the end of June. That compares with a decline of 1.1% in the previous quarter, or a rise of 0.5% adjusted for the later timing of Easter this year.

“If ever a case study on the impact the mood of the nation has on UK spending habits were needed, this quarter has provided it,” said Asda chief executive Roger Burnley.

“Consumer confidence levels are at an almost six-year low – due in no small part to the ongoing uncertainty around Brexit and amplified by the impact of weather and tracking against national sporting events in the same period last year,” he said.

Mr Burnley said that while Asda’s food business “performed well” and online growth outpaced the market during the period, its non-food business was “challenged”. Industry data published last month showed all of Britain’s big four grocers - market leader Tesco, Sainsbury’s, Asda, and Morrisons - saw total sales fall in the 12 weeks to July 14. The dip reflected a heatwave and the men’s soccer World Cup a year earlier which boosted demand.

In contrast, the same survey showed that the big five grocers in the Republic - Dunnes, Tesco, SuperValu, Lidl, and Aldi - increased sales at a clip.

Meanwhile, Asda’s US parent, Walmart set a high bar for other US retailers by posting strong second-quarter sales and boosting its full-year outlook -- even with the Trump administration escalating its trade war with China.

Comparable sales excluding fuel for Walmart stores in the US rose 2.8% in the period, beating analysts’ estimates. Primarily driving the result was a higher average spend by shoppers, and market share gains in food, wellness items, and toys.

The results were “very solid,” said Chuck Grom, an analyst at Gordon Haskett Research Advisors.

- Reuters. Additional reporting Irish Examiner and Bloomberg

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