Asda, the supermarket chain being taken over by larger rival Sainsbury’s, has revealed a 10% slump in annual profits for 2017.
The supermarket blamed price cuts and an overhaul of its own-brand products for the decline in pre-tax profits as its regrouped to fight back against the discounters Aldi and Lidl.
Pre-tax profits fell from £791.7m in 2016 – which was its worst performance since it was taken over by the American grocer Walmart in 1999 – to £712.6m last year. Sales increased by 2.6% to £22.2bn.
Asda’s chief executive, Roger Burnley, said: “Our 2017 accounts reflect a solid performance and a strong, well-managed business. During the year, momentum returned, driven by a series of planned investments in lowering prices, further improving quality and innovation in our own-brand ranges and providing an even better shopping experience whether in store or online.”
After several years of falling sales, Asda started winning back shoppers in 2017 and has clocked up four successive quarters of underlying sales growth. After stripping out Easter, Asda reported like-for-like sales up 1% in the three months to 31 March.
In April, Sainsbury’s and Asda spelled out the details of the deal that could create a new force in supermarket retailing that is bigger than market leader Tesco. Sainsbury’s will pay Walmart nearly £3bn in cash and hand it a 42% stake in the combined business if the tie-up is approved by the competition watchdog.
Sainsbury’s has promised to retain both brand names and insisted there were no plans for store closures as a result of creating the group comprising 2,800 outlets and sales of £51bn.
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