British retailer Asda's customers fear economic depression - Metro US

British retailer Asda’s customers fear economic depression

The spread of the coronavirus disease (COVID-19) in Keele

LONDON (Reuters) – British supermarket group Asda got a sales boost in the first quarter from consumers stocking up before the coronavirus lockdown but it also highlighted that 90% of its shoppers now fear an economic depression.

The company, whose attempt to combine with rival Sainsbury’s <SBRY.L> was blocked by the regulator last year, said on Tuesday its like-for-like sales, excluding petrol, increased 3.5% in the quarter to March 31, having fallen 1.3% in the previous quarter.

Asda, owned by the world’s biggest retailer Walmart <WMT.N>, said growth in food was partially offset by weaker demand for clothing and it also faced incremental costs related to the pandemic, such as for 22,000 temporary workers, staff bonuses and safety equipment.

The group’s gross profit rate and its operating income both decreased in the period.

CEO Roger Burnley said customers had moved on from initial worries about the virus to more longer term concerns about the implications of the lockdown on their family’s wellbeing and finances.

“Our latest income tracker data shows that household incomes declined 0.6% in March, the first drop since 2017 and 90% of customers told us they are worried about a depression in the economy,” he said.

A depression is a severe and prolonged economic slump that self-perpetuates as households and companies cut spending causing more damage to the economy.

Asda is the last of Britain’s big four grocers to report on the first quarter.

Market leader Tesco <TSCO.L> has estimated a costs hit from the crisis of up to 925 million pounds ($1.13 billion), while Sainsbury’s <SBRY.L> warned the profit impact could be more than 500 million pounds. The fourth biggest player Morrisons <MRW.L> has estimated additional costs of about 230 million pounds.

After the failure of the Sainsbury’s deal, Walmart said it was considering a stock market listing for Asda. In February Walmart said it was in talks with possible buyers of a majority stake in the group.

However, last month Walmart put that possible sale on hold until the coronavirus emergency is over.

(Reporting by James Davey, Editing by Paul Sandle and Jane Merriman)

More from our Sister Sites