Britain's Asda returns to sales growth after two-year hiatus

By James Davey

LONDON, Aug 28 (Reuters) - Asda returned to underlying sales growth for the first time in more than two years in its current quarter, with Britain's third-largest supermarket group crediting sharper pricing, improved availability and a better overall shopping experience.

The group, which trails market leader Tesco and Sainsbury's, said on Friday its like-for-like sales, excluding fuel, rose 0.2% in the seven weeks to August 18, having fallen 2.3% in its second quarter to end June.

Allan Leighton, Asda's executive chairman who rejoined the group in 2024 to drive a turnaround he warned could take up to five years, said returning to sales growth was "a major milestone".

'STILL IN THE FOOTHILLS OF RECOVERY'

"While this progress is encouraging, we are still in the foothills of recovery," he said, adding: "There's still more work to do."

Industry data, published earlier this month showed Asda had a UK grocery market share of 11.5%, down 40 basis points on the year.

Analysts say Asda has been hampered by the cost of servicing debt taken on when Mohsin and Zuber Issa and private equity firm TDR Capital bought 90% of the group from Walmart in a £6.8 billion ($9.2 billion) deal in 2021. TDR is now the majority owner, while Walmart retains a 10% stake.

Asda ended its second quarter with net debt of £3.2 billion.

In May, Asda struck a partnership deal with technology firm Ocado to overhaul its online business. Asda said a pilot will launch towards the end of the year, ahead of a wider rollout in 2027.

Asda stressed that over half of its revenue comes from businesses outside of traditional grocery, including 'George' clothing, fuel, pharmacy and optical.

Its second-quarter revenue, including fuel, was £6.5 billion, up 0.4%. It was up 2.1% in the first seven weeks of its third quarter.

($1 = 0.7361 pounds)

(Reporting by James Davey, Editing by Paul Sandle)