ASDA, the UK supermarket chain owned by Walmart, has reported a surge in sales during the first quarter of 2020, driven by consumers stockpiling goods ahead of the coronavirus lockdown. However, the company also highlighted that 90% of its shoppers are now concerned about an economic depression. Like-for-like sales, excluding petrol, increased by 3.5% during the quarter ending March 31, compared to a 1.3% decline in the previous quarter. While food sales saw growth, demand for clothing weakened, and the company incurred additional costs related to the pandemic, such as hiring temporary workers, providing staff bonuses, and implementing safety measures.

Both Asda’s gross profit rate and operating income declined during this period. CEO Roger Burnley stated that customers have shifted their worries from the virus itself to long-term concerns about the impact of the lockdown on their families’ well-being and finances. Asda’s latest income tracker data showed a 0.6% decrease in household incomes in March, marking the first decline since 2017. Burnley also mentioned that 90% of their customers expressed concerns about an economic depression, which is a severe and prolonged economic slump resulting from reduced spending by households and companies, further damaging the economy.

Asda is the last of the four major British grocers to announce its first-quarter results. The largest player in the market, Tesco, estimated a potential impact of up to £925 million ($1.13 billion) in costs due to the crisis, while Sainsbury’s warned of a profit impact exceeding £500 million. Morrisons, the fourth-largest player, estimated additional costs of around £230 million. Following the failed attempt to merge with Sainsbury’s last year, Walmart revealed its plans to explore a stock market listing for Asda. In February, Walmart stated that it was discussing a potential sale of a majority stake in the chain with potential buyers.

Asda’s CEO believes that talks between Walmart and potential buyers for a majority stake in the British supermarket will likely resume once the industry settles into a “new norm” and the worst of the coronavirus crisis is over. Last month, Walmart paused discussions on the sale so that management could focus on dealing with the impact of the pandemic. Burnley remains optimistic, expressing that there is still strong interest in the sale and that talks will resume when the timing is appropriate.

Useful links:
1. ASDA Official Website
2. Walmart Official Website