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Asda warns of material profit hit after ‘disappointing’ annual sales
Chief executive says supermarket needs significant investment to get it ‘firing on all cylinders’
Laura Onita in London
Financial Times
14 March 2025
Struggling UK supermarket Asda has warned of a material hit to profits this year as its new boss vowed to reinvest in the chain to attract shoppers back to its stores.
Allan Leighton, who rejoined the business as executive chair in November, gave a blunt assessment of Asda’s annual performance on Friday, promising “a big investment” to turn it around even though it would “materially reduce our profitability this year”.
“Looking ahead we still have plenty of work to get our business firing on all cylinders again,” he said, adding that the hit to profitability should “reverse as our market share recovers and improves over time”.
Asda has been grappling with shrinking sales in an increasingly competitive market as well as availability problems and declining store standards. Its grocery market share fell to 12.6 per cent in February, according to Kantar data, from 14.8 per cent when the £6.8bn takeover by the Issa brothers and private equity firm TDR completed in 2021.
Summarising the group’s performance, Leighton, who helped rescue Asda from the brink in the 1990s, said: “Sales disappointing, profits OK-ish, cash, leverage and balance sheet pretty good.”
“The way I think about this is: it’s an investment warning, not a profit warning.
“We’ve got well-trailed issues: pricing, availability, range architecture — they are the three things we have to fix. We are making progress on all three of those.
“We’re going to . . . invest in driving the business forward rather than [saying] ‘here’s a business that’s just going backwards in terms of profitability’,” he added.
The food retailer, which was acquired in a leveraged buyout in 2020 by the Issas and TDR, recorded a 3.4 per cent drop in like-for-like sales for the year to the end of December.
Total revenue, excluding fuel, was broadly flat at £21.7bn, while adjusted underlying profits, its preferred metric, increased 5.8 per cent to £1.1bn.
The company declined to comment on profit or loss before tax, a metric that provides a clear picture of a company’s finances.
The Financial Times previously reported that Asda made a pre-tax loss of £111.7mn in the nine months to the end of September, according to the most recent documents for Bellis Finco.
Leighton did not say how much Asda was reinvesting into the business, including to bring its prices closer to those offered by other major rivals, but said that it was “a serious strategic move to reset the company for the long term” and “not a piece of tactics”.
Rob Hattrell, a partner at TDR who sits on Asda’s board, said the private equity firm would not need “to put any more equity in”. “We can generate all the investment we need from within the company.” |
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New One year low |
Private equity owned ASDA are on the floor due to being overleveraged - they have just made huge redundancies . I believe that Tesco and Sainsbury are the beneficiaries of their shortcomings . ASDA announcement today of 4ppl off of fuel is pure marketing puff . The wholesale fuel market on the weekly lag average for this week came down almost 4ppl - its just guff . |
May have been better if we had followed the example of the QIA who over the past couple of years have reduced their stake from nearly 25% to around 10%. |
Interesting that Ocado never got hit as well… |
Ok you want bid for Sbry that will never be acceptable below 500 imo ..
So you arrange a Friday afternoon hit on the supermarkets..to hide the removal of all the long positions by private punters …This is a perfect scenario for a bid …and is it my imagination or did Blackrock increase there holding |
Bid coming |
Basically it seems all the supermarkets ever try and do is to fight it out on price.
The problems with the likes of Sainsbury's, ASDA or Morrison is they have a high cost structure and therefore struggle to compete on price, are inefficient and less competitive then the likes of Aldi and Lidl. |
16% down in 2025 :-( |
Buying opportunity. Everyone knows Asda is a basket case of leverage debt. Sainsbury's and Tesco completely different, Tesco's share price has had a incredible run in the last year. It's Sainsbury's turn. |
UK supermarket stocks tumbled on Friday after Asda said it would undertake a "substantive" programme of investment in price, availability and the shopping experience to get the business "firing on all cylinders again" that will "materially" dent its profits. |
Worth almost 10% less than this morning. Go figure. |
Why such a decline in Tesco and Sainsbury's this afternoon? |
If it's any consolation Hem, I also bought SBRY at 370p and VOD at 190p years ago :( |
BME holding up ok so far - it took the hit a few weeks back
discounters show the strain first, i wasn't expecting the majors to get hit so quick though |
I will also sell my holding if this ever recovers to 260p |
Struggling British supermarket Asda has warned that required investment in lowering prices and improving product availability and ranges will "materially reduce" profit this year.
Private equity firm TDR Capital, Asda's majority owner, in November brought back Allan Leighton to be the grocer's executive chairman, more than two decades after he served as CEO and turned the chain around before selling it to Walmart.
Leighton launched major price cuts in January in an attempt to kick start a recovery - reintroducing the "Rollback" promotion that was first used in the 1990s.
Leighton told reporters on Friday that the aim was to be 5% to 10% cheaper than supermarket rivals, though regaining customers’ trust would take time.
"This will materially reduce our profitability this year, which we expect to reverse as our market share recovers and improves over time.”
Shares in Tesco and Sainsbury's were down 4.5% and 3.7%, respectively, on fears of increased price competition.
Analysts say Asda has been hampered by the cost of servicing debt taken on when Mohsin and Zuber Issa and TDR bought 90% of the group from Walmart, which still holds the remaining 10%, in a 6.8 billion pound deal in 2021.
Net debt was 3.8 billion pounds at the end of December and interest costs were around 300 million pounds over the year. |
Yes, it's the ASDA profit warning for sure. |
Pets at Home are thinking of letting go 2,500 staff...Pets at Home's chief operating officer Anja Madsen claimed the moves were being made to create a “simpler, fairer and more efficient retail business”. |
Asda read across |
This has been a total dog of an investment since I bought at over 4£ years ago. I've probably had the difference from divis. If it ever goes anywhere near £4 again I'm out. However, like my Vodafone investment years ago I doubt it ever will. |
That's been known about for months though |
NI increase was announced in Oct 24 so surely priced in. This drop is not only affecting SBRY but also competitors / sector.
Very frustrating. |
I think its to do with the up and coming increase in both the NI and minimum wage which is why Poundland has been put up for sale. |
Fallen off a cliff again.
I give up with this one. |
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