Mar 29, 2023
Asda Profit Slides as UK Grocer Battles Stubborn Inflation
(Bloomberg) -- Asda reported a steep decline in earnings, a sign of how Britain’s cost-of-living crisis is weighing on supermarket margins.
The UK’s third-largest grocer saw adjusted Ebitda drop 24% to £886 million ($1.01 billion) in 2022, according to an earnings statement Wednesday. Asda said it was due to the grocer absorbing cost increases as much as possible to retain customers.
British supermarkets are under pressure to keep shoppers loyal as the discounters Aldi and Lidl take more market share, growing sales by more than 20% in the past year. Grocery price inflation hit another record this month, with little sign of the situation easing for cash-strapped shoppers.
“We took a conscious decision to support customers by investing heavily to mitigate the impact of inflation and keep prices as low as possible,” said Mohsin Issa, Asda’s co-owner. “Although this contributed to a decline in profitability, it was the right thing to do for our customers and will ultimately help to deliver long-term growth.”
Brothers Mohsin and Zuber Issa acquired a majority stake in Asda with buyout firm TDR Capital in 2021. There’s speculation that the owners will merge the retailer with the UK arm of EG Group, their petrol filling station and convenience business.
Asda has taken steps to reduce costs as it tries to cut jobs and change night shifts to late evening or daylight hours instead. Like other retailers, Asda has increased employee salaries in reaction to inflation with plans for a double pay rise this year.
The supermarket managed to turn around sliding sales last year by introducing its Just Essentials range of budget items. Around 10 million customers regularly buy the cheaper products. Sales came in flat last year at £20 billion.
©2023 Bloomberg L.P.