November 14, 2019 / 1:50 PM / 25 days ago

Britain's Asda blames Brexit uncertainty for sales dip

LONDON (Reuters) - Asda, the British supermarket arm of the world’s biggest retailer Walmart (WMT.N), blamed lower sales in its latest quarter on Brexit uncertainty, saying it had negatively affected consumers’ spending patterns.

FILE PHOTO: A worker pushes shopping trolleys at an Asda store in west London, Britain, April 28, 2018. REUTERS/Toby Melville/File Photo

The group, whose attempt to be taken over by rival Sainsbury’s (SBRY.L) for 7.3 billion pounds ($9.3 billion) was blocked by Britain’s regulator in April, also said on Thursday its gross profit rate, or margin, and its operating income had both declined in the three months to Sept. 30.

Prime Minister Boris Johnson has called a snap election for Dec. 12 to try to break a deadlock over the country’s European Union exit deal. Britain is currently due to leave the bloc by Jan. 31.

“This quarter has afforded consumers little respite from political or economic uncertainty and this has shown in their spending,” said Chief Executive Roger Burnley.

Asda’s comparable sales fell 0.5% in the quarter. That compared to a second quarter rise of 0.5%.

It said comparable sales had improved sequentially if the previous quarter’s number was adjusted for Easter. It said it also grew online grocery sales ahead of the market.

Asda said a lower gross profit rate reflected price markdowns in clothing following a softer summer season versus last year. The fall in gross profit rate, plus increased operating expenses, meant operating income was also lower.

Asda’s latest quarter has been marked by a bitter dispute with workers over the imposition of a new standardized contract which drew criticism from unions and opposition Labour leader Jeremy Corbyn.

“RARING TO GO”

Official data, also published on Thursday, showed British consumers also cut back on their spending in October, adding to signs the economy is losing momentum.

With Brexit unresolved and an election creating new uncertainties, many UK retailers are looking nervously at Christmas. But Burnley said Asda “was ready and raring to go”.

Industry data for the last three months published on Tuesday showed all of Britain’s big four grocers - market leader Tesco (TSCO.L), Sainsbury’s, Asda and Morrisons (MRW.L) - all losing market share to German-owned discounters Aldi and Lidl, who are opening lots of new stores.

The big four have been trying to narrow the price gap with the discounters and are also differentiating their offers to stem the loss of share.

As well as lower prices, Asda’s strategy focuses on accelerating innovation in own-brand products, better store environments and product availability, along with improvements in its e-commerce operations and use of technology.

With the Sainsbury’s deal thwarted, Walmart, which purchased Asda for 6.7 billion pounds in 1999, is considering a separate stock market listing for Asda. Burnley has said it could happen in two years.

Separately on Thursday Walmart reported better-than-expected third quarter sales.

Reporting by James Davey; Editing by Emelia Sithole-Matarise

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