• George – the UK market leader in kidswear and third-largest fashion retailer by sales volumes – grew clothing revenues by 3% to £293m in Q1, and 3% on a like-for-like basis
• Launched Aldi and Lidl price match, with further price cuts worth £70m in May
• Total net leverage as a multiple of pro forma EBITDA after rent reduced by 1.1x year-on-year to 3.0x at the end of Q1
• Post Q1, Asda successfully refinanced more than £3.0bn of debt, strengthening its capital structure into the next decade. This fiscal strength was recognised by both Moody’s and Fitch ratings agencies in their recent upgrade of the Asda business.
Asda has today announced its results for the first quarter ended 31st March, delivering a 6.6% increase in total revenues (excluding fuel) to £5.3bn and 1.4% growth in like-for-like sales.
The supermarket’s continued growth in total revenues, like-for-like sales and margin improvement in food and non-food includes a particularly strong contribution from George at Asda, which outperformed the fashion and homewares markets during the quarter.
George, the UK’s third-largest fashion retailer by sales volume and the market leader in kidswear, grew its total clothing revenues by 3% to £293 million in the first quarter and by 3% on a like-for-like basis, as customers responded positively to its investment in price, style and quality credentials.
Top performing categories included schoolwear, where the durability and outstanding value of George’s market-leading range helped to drive an 11% increase in sales in Q1, and homewares, where sales rose 11.7% having been boosted by the launch of the brand’s new Stacey Solomon Spring / Summer collection.
Online grocery also continues to perform well – representing 18% of food sales, driven by a 5.6% increase in the number of average weekly orders in Q1.
Mohsin Issa, Asda’s Co-Owner, said: “Asda made good progress against its strategy in the quarter, laying the foundations for long-term success – including completing the conversion of our newly acquired sites to Asda Express, as part of our strategic expansion into the growth markets of convenience and food-to-go. We did this while continuing to deliver great range, value and convenience, including investing in lower prices and the quality of our food and non-food at a time when the household budgets of our customers remain under pressure.
“George at Asda again outperformed the value market in fashion and homewares, and it is very encouraging to see our investment in the brand bearing fruit both online and in stores. Customers also responded positively to our ongoing investment in the Asda Rewards loyalty scheme, which now has around six million regular users, and online grocery where we are firmly established as the number two player in the market. I want to sincerely thank all of our colleagues for their hard work over the quarter, as we remain committed to doing the right thing by them, our customers and the local communities which we serve.”
The retailer continued to invest in enhancing the value and quality of its food offering resulting in a 1.3% increase in like-for-like grocery sales during the quarter.
In January, it became the first supermarket to price match Aldi and Lidl – whichever is cheapest – reducing prices by an average of 17% on more than 280 household staples, including milk, bread, cheese, tea, and fresh fruit and vegetables.
The Aldi and Lidl Price match has subsequently expanded to include more than 400 core products.
After the quarter ended, Asda announced new price cuts on hundreds of products worth £70m, reducing prices by an average of 11%, as part of its focus on delivering uncompromising value for customers.
Michael Gleeson, Asda’s Chief Financial Officer, said: “Building on our strong full-year performance, today’s results are further evidence of the underlying strength of the Asda business. During Q1, we continued to help customers manage their household budgets by providing uncompromising value on food and non-food ranges. It was pleasing to see our investment in further enhancing the quality of our food, Aldi and Lidl price match, Asda Rewards, and George at Asda resonate so strongly with customers.
“Since the shareholder group acquired the business in June 2021, they have invested more than £3.5bn to grow the business organically and via strategic acquisitions and a further £800m to replace legacy Walmart IT infrastructure with new bespoke Asda systems.
“This has transformed Asda into a diversified retail group, with a significant presence in the fast-growing convenience and food-to-go markets. A key focus now is to invest in enhancing the customer experience in our larger supermarkets and superstores having done the heavy lifting converting acquired convenience stores to Asda Express.
“Earlier this month, we completed a significant refinancing, extending most of our debt obligations into the next decade following strong demand from investors. This provides us with a robust and stable capital structure and the capability to continue investing to deliver our ambitious long-term growth plans.”
Ongoing expansion in convenience and investment in stores
Asda continued to invest in its long-term future during the quarter, including completing the conversion of circa 470 convenience sites acquired from the Co-op and EG UK to Asda Express, increasing its total store estate to over 1,200 sites – the largest in Asda’s 59-year history.
This investment leaves Asda strategically well-positioned in the fast-growing £40bn convenience and £60bn food-to-go markets.
The retailer remains on track to reach 500 Express convenience stores by the end of this year, as new standalone sites open throughout the UK to bring Asda’s heritage in value to many more customers. New locations in the pipeline include Manchester, Liverpool and Cardiff city centres and four sites in London.
Asda has also commenced a £50m store upgrade programme to improve the customer experience across 173 stores, focused on upgrading its superstores and supermarkets for long-term success. This investment will see 50 of its highest-performing stores receive major upgrades as part of an enhancement programme, while a separate refresh programme will see enhancements across 123 stores.
Post Q1, Asda announced plans for its first mixed-use redevelopment of an established store site at Park Royal in London. The scheme, which remains subject to planning consent, features a brand new 60,000 sq. ft superstore and 1,500 new homes adjacent to and above the new store.
Delivering uncompromising value
Throughout the quarter, Asda focussed on providing customers with uncompromising value every time they shopped. The supermarket has continued to shield customers from price rises, with market data showing its rate of inflation was notably lower than competitors and the market during Q1 – a trend which continued in April.
In addition to becoming the first supermarket to price match both Aldi and Lidl on core everyday products, Asda also launched two new value propositions in Q1. ‘Fab 5’ offers five fresh produce items at market-leading prices refreshed every two weeks and ‘Mega Event Price Drop’ features significant discounts on different branded products each weekend.
Asda Rewards continues to provide great savings, with customers earning £65m in their ‘Cashpots’ during the quarter, which can be spent in store or online to reduce their bills. With around six million customers regularly using the app, and half of all sales now linked to Rewards, the total amount customers have earned in their ‘Cashpots’ since the launch of Asda Rewards in August 2022 has reached over £420 million.
Furthermore, Asda is exploring innovative ways to leverage its Rewards program to provide even greater value to customers. Post Q1, Asda introduced the ‘Rewards Baby & Toddler Club,’ offering members 10% back in their Cashpots across all baby products, along with exclusive benefits and access to helpful articles tailored to expecting parents and those with children up to the age of five.
Winning in value fashion and home
George’s best-selling categories during Q1 included the market-leading schoolwear range, which saw an 11% increase in sales year-on-year, and the relaunched adult denim range, with an 8% rise in sales compared to the previous year.
The collaboration with TV personality Billie Faiers across women’s, kids and babywear, as well from the relaunch of its trend-led sub-brand G21, supported by influencer Sophie Piper, in March also proved popular with customers.
In George Home, the business expanded its successful partnership with Stacey Solomon with the launch of a new 127-piece Spring / Summer collection featuring products for the whole home and a separate 41-piece collection dedicated solely to children’s interiors.
Successful refinancing and strengthened balance sheet
Post Q1, Asda successfully refinanced more than £3.0bn of its debt – reflecting strong demand for investors and extended its debt obligations into the next decade. The supermarket has also recently secured an upgrade to its corporate rating from Moody’s to B1 from B2, while Fitch Ratings raised their outlook on Asda’s Long-Term IDR to positive from stable and affirmed the IDR rating at B+, while S&P Global Ratings assigned a B+ long-term issuer rating with a stable outlook.
The supermarket’s total net leverage as a multiple of pro forma EBITDA after rent reduced from 4.1x in Q1 2023 to 3.0x at the end of Q1 2024.
Asda’s net debt at the end of Q1 was £3.8bn, net of more than £1bn cash on the balance sheet – and the business is fully committed to further deleveraging.
Investment in colleagues
Asda announced a record £150m investment in retail pay in the quarter to become the highest paying traditional supermarket. The investment will see rates increase by 8.4% to £12.04 from 1st July for hourly-paid store colleagues in Asda Retail and Asda Express to become the highest paying traditional grocery retailer. Rates inside the M25 will rise to £13.21.
Asda has delivered a total increase of 28% in retail pay since the acquisition of Asda by the shareholder group completed in June 2021 – with a total pay investment of almost £415m.
