Asda cost cutting helps pre-tax profits rise despite revenue fall

Asda grew its pre-tax profits by almost 6% in 2015, despite its sales continuing to fall at an unprecedented rate, its annual accounts published in Companies House show.

Asda's latest TV ad
Asda's latest TV ad

During the calendar year 2015, the supermarket’s sales slid 3.7% to £22.4bn, with former chief executive Andy Clarke describing it as Asda’s "toughest" year ever. More recent data have shown sales declining even more rapidly. In the 12 weeks to 13 August, sales fell 5.6% on the previous year (Nielsen).

According to the recently published accounts for last year, like-for-like sales were down 4.7% in 2015. But despite this, the retailer upped its pre-tax profits by 5.9% to £974.9m after reducing costs. Asda’s wage and pension bill was down 2.2% to £2.3bn, thanks to a 5% cut in its workforce – more than 8,500 jobs.

Asda also made savings in procurement – by dealing more directly with producers – and warehouse and transport efficiency.

But analysts have said that the cost-cutting measures have taken a noticeable toll on the in-store experience, affecting the availability of products and standard of service provided – developments which may make it harder for Asda to escape from its current downward spiral.

Asda brought in new chief executive Sean Clarke in July, while next month, Sainsbury’s retail and operations director Roger Burnley will become Asda’s chief operating officer.

The retailers' chief marketing officer Andy Murray moved its creative and media accounts into Publicis Groupe (Saatchi & Saatchi and Blue 449) in April as part of its turnaround plan in a shock move, splitting with VCCP and Carat.

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