// Asda posts drop in profits thanks to cost price inflation
// The grocer remains confident as it focuses on price investments and new propositions
Asda has reported a 24% drop in profits in 2022, which owner Mohsin Issa termed a “highly resilient” performance, as sales start to improve.
Adjusted EBITDA plunged to £886m over the year as Issa said it made a “conscious decision to support customers by investing heavily to mitigate the impact of inflation and keep prices as low as possible”.
“Although this contributed to a decline in profitability, it was the right thing to do for our customers and will ultimately help to deliver long-term growth.” he said.
Total sales edged into positive territory by 0.1% in 2022 as Asda’s like-for-likes improved throughout the year rising to 5.4% in the final quarter, when it emerged as the best-performing traditional grocer over the Christmas period.
It said momentum had continued into the new year with like-for-likes up 6.8% in February.
Issa said it had “made good progress laying the foundations to restore Asda to the number two position in UK grocery”.
It has focused on giving customers desirable products at affordable prices and the ability to shop with the grocer whenever and however they like, he said.
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The grocer invested across the year to shield shoppers from inflationary pressures.
It reduced the prices of more than 100 popular branded and own-branded lines by an average of 12% and locked these until the end of the year to give customers more control over their grocery budgets.
It also launched Just Essentials in May, a new value range of 300 products designed to keep households running on the tightest of budgets.
The range has proved a success with over 10 million customers regularly shopping the range in the second half of the year and sales rising 73% year-on-year.
The grocer also rolled out the Asda Rewards loyalty programme to all stores in August, giving customers the chance to earn pounds rather than points every time they shop.
More than 4.2m customers are using the app each month and 37% of total sales are now linked to the loyalty programme.
Moreover, the grocer has been focusing on convenience as its new ‘Asda Express’ brand launched targeting areas where Asda has a limited presence such as residential locations and transport hubs.
The first two Asda Express stores opened in Sutton Coldfield and Tottenham Hale at the end of last year, with a further 30 to follow this year, beginning with Calne in May and Romford train station in June.
To accelerate its growth in the convenience market, Asda acquired 129 convenience stores and attached petrol stations from the Co-op for an enterprise value of £438m.
Asda is also investing £28m to increase hourly pay rates for 13,000 distribution colleagues by a minimum of 8%.