Asda warns of tough year ahead

Andy Clarke, chief executive of supermarket chain Asda, has stressed that 205 could be a tough year for the retailer as shoppers continue to look for discounted products.

Speaking to BBC 5 Live, the Asda boss said profitability has fallen dramatically in the sector, especially as discounting retailers gain market share.

Figures from Kantar Worldpanel recently revealed that Aldi and Lidl had reached a record combined market share of 8.6 per cent of the total UK grocery shopping sector.

This increase has impacted on the success of the other so-called “Big Four” retailers – Tesco, Asda, Sainsbury’s and Morrisons.

“The level of profitability decline in some retailers over the course of 2014 – we’ve never seen it before,” said Mr Clarke.

“It suggests 2015 is going to be equally as challenging.”

Asda’s market share is estimated to have decreased by one per cent in three months to December as consumers continue to shop around for the best deals.

This could be further reduced following the recent announcement that Danish discounter Netto is planning to partner up with Sainsburys to return to the UK market at some point in 2015.

While Aldi is already undertaking a large scale expansion plan across the UK with the creation of 35,000 new jobs in the UK and doubling its total number of stores to 1,000 by 2022.

The former UK managing director of Aldi, Paul Foley told the BBC that discounting chains could eventually account for 20 per cent of the UK supermarket share.

He added: “The golden age of food retail profits by big, very successful, very well run businesses is over and discounters are the disrupters.”

However, Mr Clarke remains upbeat about Asda’s long term prospects and highlights the failings of previous discount retailers.

“Kwik Save had a place in this market for a good period of time and it disappeared from the landscape.

“I’m not suggesting that’s going to be the case with the current discounters but they are a retail format that’s been in this country for a good period of time.”

“They’re a very different shopping experience. They’ve got roughly ten per cent of the product range of a superstore.”

Although he added: “The discounters will grow and there will be winners and losers.”