Asda has warned that the money it will spend on lowering prices for customers and improving product availability will mean lower profits this year.
Britain’s third largest supermarket has been struggling to keep up with its competitors, losing market share to its bigger rivals such as Tesco and discounters Aldi and Lidl last year.
After reporting its annual earnings, Asda’s executive chairman Allan Leighton said the grocer was aiming for its prices to be five to 10% cheaper than its rivals going forward.
He said the supermarket was looking to invest in cutting prices further and put more staff on the shop floor, but acknowledged regaining customers’ trust in the brand would take time.
Asda revealed on Friday that sales, excluding fuel, fell almost 1% to £21.7bn last year.
Mr Leighton said the supermarket’s sales were “disappointing”, but that its profits being up 6% on 2023 to £1.1bn were “OK-ish”.
“Obviously there are one or two things that we need to fix,” he added. “Our pricing, our availability, and our range architecture – that has all started…we’re starting to make some progress.”
“This is an investment warning, not a profit warning,” said Mr Leighton.
Asda has more 580 supermarkets, almost 500 convenience stores and 769 petrol forecourts.
It has been without a permanent chief executive since 2021. Its co-owner Mohsin Issa stepped down from running the supermarket last year.
In January, Mr Leighton, who returned to Asda in November after 20 years where he was previously chief executive, launched major price cuts – reintroducing the “Rollback” promotion that was first used in the 1990s.
But Mr Leighton said cutting prices would not be a “quick fix” to get the supermarket back on a stronger footing.
“The only way we have got to rebuild profit is through sales growth,” he added.
