The supermarket chain ASDA has reportedly blamed its downturn in profits in the third quarter on increasing consumer uncertainty over Brexit, culminating in the increasing concern that the country might end up leaving without a deal or not at all. The Big Four retailer saw a 0.5% drop in profits in the last quarter, despite making an equal amount of gain over the summer. The supermarket, which is owned by American retail giant Walmart, argued that ongoing political and economic turmoil has caused consumers to be thriftier with their spending, resulting in a decrease in sales made by the company over the last three months.
The UK grocery sector, which has become increasingly crowded as smaller, discount supermarkets like Aldi and Lidl grow in popularity and sales, has never had the steadiest of profit margins, but Asda has taken a particular hit over the last 12 weeks, seeing sales decline by 1.2 per cent since September. But it’s not alone – according to new data released by the consumer behaviour company Kantar, all of the Big Four supermarkets – Sainsbury’s, Tesco, Morrisons and ASDA – have taken significant hits over the last quarter. Despite ASDA straddling the line between discount retail and the common strategies enforced by the other large supermarket chains in the United Kingdom, it has struggled to drum up the same level of business that placed it in the Big Four originally.
However, the CEO and top directors at Walmart and ASDA have suggested that, despite the downturn in profits, ASDA’s best days are yet to come. Earlier this year, bosses suggested that the retail company could be floated on the stock market over the next few years, especially as it seems like Walmart is looking to sell off the supermarket to a domestic investor. The company has also pledged to keep prices low and continue delivering quality with competitive pricing, despite the dip in profits. However, the looming uncertainty of Brexit is likely to continue affecting spending – and it looks like supermarkets will be one of the hardest-hit sectors.
ASDA also may have been negatively affected by the attempted merger between themselves and Sainsbury’s, which ended in catastrophe after the Competition and Markets Authority (CMA) blocked any further negotiations on the deal, suggesting that it would allow the two supermarkets to monopolise the sector. The deal was designed to help eliminate competition in the market, but seems to have backfired for both supermarkets after millions were pledged to ensure a smooth transition for both.