Walmart-owned supermarket Asda saw its profits take a hit in the last quarter as it continues to ramp up its efforts to cut prices for consumers in a bid to fend off competition.
In the three months to 31 March, Asda’s like-for-like sales increased by 3.4 per cent. But, stripping out the benefit of an early Easter, sales ticked up 1 per cent.
Back in April, Sainsbury’s confirmed it was engaged in ‘advanced’ talks with Asda about a potential merger deal.
The proposed deal comes as Britain’s supermarkets battle to topple Tesco, as well as popular German rivals, Aldi and Lidl.
Deal on the cards: Sainsbury’s in in ‘advanced’ talks with Asda over a potential merger
The Competition and Markets Authority is scrutinising the proposed deal and it is expected that scores of stores will have to be closed as part of any competition review.
Asda’s online grocery sales rose by 8.3 per cent in the quarter, with sales from George.com jumping by 21.9 per cent.
The supermarket’s gross profit fell year-on-year, which the company attributed to its investment in price reductions and an early Easter forcing the firm to change its sales mix.
Roger Burnley, Asda’s chief executive, said: ‘During the first three months of the year, we have continued to invest sensibly where it matters most to our customers with lower prices, innovation in our own brand and further improving their shopping experience whether in store or online.
‘Whilst we are not complacent, we are positive about our growing momentum and excited by the opportunity that our proposed merger with Sainsbury’s offers to accelerate our successful strategy and go further, faster.’
Sales: Asda’s online grocery sales rose by 8.3 per cent in the quarter, with sales from George.com jumping by 21.9 per cent
As part of its cost cutting drive, in January Asda announced it was cutting 28 jobs at its head office on top of the 300 job losses unveiled in September.
Behind Tesco, Sainsbury’s and Asda are the second and third biggest supermarkets in the UK respectively.
If the proposed merger goes ahead, the combined businesses would comprise 2,800 stores, representing a 31.4 per cent slice of the market, putting it slightly ahead of Tesco.
Critics claim the merger would create ‘local monopolies’ of Asda and Sainsbury’s stores scattered around small areas up and down the country.
The bosses of both companies have said prices of popular goods in their stores could be cut by as much as 10 per cent if the deal goes ahead.
Monopolies? Critics claim the merger would create ‘local monopolies’ of Asda and Sainsbury’s stores scattered around small areas up and down the country