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Tesco, Sainsbury's slide as Asda says overhaul will dent profits
(Sharecast News) - 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. At 1555 GMT, Tesco and Sainsbury's shares were down 6.1%, while Marks & Spencer was 3.5% lower.
In an update on its performance for the year to the end of December 2024, Asda said the investment will "materially" reduce its profitability this year, but that this is expected to reverse as its market share recovers and improves over time.
News of the investment came as Asda reported a 5.8% jump in group adjusted EBITDA to £1.14bn. This was driven by improved gross margins, particularly in non-food, reflecting the strength and scale of the George business, as well as a full year of profit from the 356 Asda Express convenience stores and forecourt sites acquired from EG Group.
However, total revenue - excluding fuel - dipped 0.8% to £21.7bn, while like-for-like sales fell 3.4%.
Executive chairman Allan Leighton said: "Everyone is focused on making Asda the number one choice again for busy hard-working families who demand value. This is what's driving all of our actions across pricing, ranging, merchandising and every part of the business.
"Following the return of Rollback in January, our price advantage has strengthened and customers' perceptions of the value we offer is starting to improve. We will move thousands more products to Rollback at regular intervals this year.
"Looking ahead we still have plenty of work to get our business firing on all cylinders again. While regaining customers' trust will take time, we will undertake a substantive and well backed programme of investment in price, availability and the shopping experience to deliver this. This will materially reduce our profitability this year, which we expect to reverse as our market share recovers and improves over time."
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