By James Davey
LONDON (Reuters) – British supermarket group Asda on Thursday launched a major round of price cuts, with “a significant investment” its new boss hopes will kick start a recovery for the current industry laggard.
In November, retail veteran Allan Leighton returned to Asda, Britain’s third largest grocer, as executive chairman more than two decades after he served as CEO when he turned around the business before selling it to Walmart.
Industry data published this month showed Asda’s sales plunged 5.8% in the 12 weeks to Dec. 29 year-on-year, with a 1 percentage point loss of market share over the year.
On Thursday, Leighton said Asda, majority owned by private equity firm TDR Capital, was cutting the prices of over 4,000 products across every category in the store, with an average discount of 25% – reintroducing the “Rollback” promotional mechanism that was first used in the 1990s.
Examples of price cuts include Asda Thin Cut Beef Steaks (400g) reduced by 36% to 3.88 pounds ($4.82) and Ben & Jerry’s Luxury Ice Cream Cookie Dough (465ml) reduced by 44% to 2.84 pounds.
Leighton said Asda was lowering prices throughout stores and online to make it “the cheapest traditional supermarket” – a title market leader Tesco says it has held for over two years.
Shore Capital retail analyst Clive Black said shares in Tesco and No. 2 Sainsbury’s would likely be marked down in early trading on Thursday on the back of Asda’s move.
“Asda had to do something, it’s been ceding enormous market share losses for some time,” he said.
“But it’s not just about price, Asda’s stores have been dirty, availability’s been poor, customer service has been weak and morale has been low, so they also have to address those issues.”
Asda has simultaneously abandoned a scheme, introduced last January, that matches the prices of discounters Aldi and Lidl on hundreds of comparable grocery products.
Walmart retains a 10% stake in Asda.
($1 = 0.8044 pounds)
(Reporting by James Davey)
