Retail and consumers

Asda profits slide as supermarket chain cuts prices


Profits at Asda slipped by almost a quarter last year, while sales were flat, as the UK supermarket chain cut prices.

Sales, excluding fuel, rose 0.1 per cent in 2022 to £20.4bn, while adjusted underlying profits fell to £886mn from £1.2bn the previous year.

Mohsin Issa, who co-owns the grocer with his brother Zuber and private equity group TDR, said that although the price reductions “contributed to a decline in profitability, it was the right thing to do for our customers” amid the cost of living crisis.

The company did not disclose the impact of fuel sales on earnings. Some industry observers last year accused UK supermarkets of profiteering from high fuel prices, which they deny.

The Issas’ ambition is for Asda to overtake J Sainsbury as the country’s second-largest supermarket as UK chains battle to retain existing cash-strapped customers and attract new ones.

Mohsin said the grocer made “good progress laying the foundations to restore Asda to the number-two position in UK grocery” since they bought it for £6.8bn in 2020.

Tesco remains the largest grocer with a 26.9 per cent share of the market, while Sainsbury’s is on 14.8 per cent and Asda 14.3 per cent, according to the most recent Kantar data.

The Issas, who also co-own EG Group with TDR, are exploring a range of options, including a merger of EG’s UK business with Asda, to tackle the petrol station empire’s debt mountain, which starts to mature in 2024.

In January, credit rating agency Moody’s warned that EG faced a growing risk of a rating downgrade if it failed to address its £7bn debt pile in an environment where interest rates have risen sharply.

The note to investors said: “EG has very high governance risks mainly driven by an aggressive financial strategy, high leverage and a majority private equity ownership.

“Governance risks are somewhat mitigated by the positive progress made over the past two years, during which EG has appointed independent directors to its board, improved internal controls and published its 2020 consolidated accounts with an unqualified opinion by its new auditors.”

Additional reporting by Will Louch in London and Kaye Wiggins in Hong Kong



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