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Asda reported an increase in sales and profits last year, driven by a boost in sales during the cost of living squeeze.
The UK’s third-biggest supermarket chain, owned by billionaire brothers Zuber and Mohsin Issa and private equity firm TDR, said adjusted earnings after rent, its preferred profit measure, rose 24 per cent to £1bn in 2023, from £867mn the previous year. It did not disclose pre-tax numbers.
Overall revenues rose 7.1 per cent to £21.8bn, while like-for-like sales increased 5.4 per cent.
Sales momentum, however, slowed down in the second half of the year, with the group reporting a 2.2 per cent rise in its fourth quarter, down from 2.8 per cent in the third quarter and 7.8 per cent in the first.
Finance chief Michael Gleeson said on Monday that the group’s low-cost range Just Essentials and the launch of its loyalty app helped to drive higher sales in 2023.
Mohsin Issa, who has been running Asda but intends to relinquish day-to-day control if a chief executive is found, said Asda was a “powerhouse built on rock-solid foundations”.
The results come as the Issa brothers, who also co-own petrol station empire EG Group with TDR, seek to simplify the division of assets between them.
EG Group revealed last month that it was in talks to offload some UK assets to Zuber Issa in what the company told investors was an attempt to reduce the debt pile of its petrol station empire. Mohsin Issa previously dismissed speculation about a rift with his brother.
Despite the uptick in sales, Asda has consistently underperformed its bigger rivals Tesco and J Sainsbury, monthly industry data has shown. It has a 13.8 per cent share of the UK grocery market, according to research group Kantar.
Clive Black, a retail analyst at Shore Capital, said: “To only highlight ebitda is to mislead . . . depreciation matters, finance costs are real. Commendable debt reduction is important and will ease pressure on Asda, but it is ceding a lot of grocery market share in the search for short-term cash.”
Asda has been burdened by finance costs due to high levels of debt since the Issas and TDR bought the business from Walmart in a £6.8bn deal in 2020.
Net debt at the end of 2023 was £3.8bn and more than 90 per cent was secured on fixed rates of interest. The company said it was “fully committed to further deleveraging”.
