Asda profits plunge 10% due to price cuts aimed to ‘return momentum’

Supermarket giant Asda has reported a 10% drop in profits for the full-year period up until 31 December 2017 attributed to “investments in lowering prices to mitigate the impact of food inflation”.

The company reported pre-tax profit of £712.6m down 9.6% from £791.7m the previous with operating profit also having decreased by 13% to £735.4m from £845.3m. However like-for-like sales in the period increased 0.5% compared with a 5.7% decrease in 2016.

The supermarket has also reported cashflow from operating activities of £1.2bn, with net cash inflow for the year £309.0m. The accounts also confirm that Asda paid £128.4m corporation tax in 2017.

During 2017, Asda opened one new ‘Home Shopping Centre’, three new superstores and five new supermarkets, representing 146,000sq ft of new space.

The news comes only a month after it was revealed that Asda agreed to a proposed merger with Sainsbury’s, worth £13bn. Although this may lead Sainsbury’s having to sell at least 73 stores in order for the merger to go ahead.

Earlier this month, Asda also reported its fourth consecutive quarter of growth with a 1.0% (Easter adjusted) increase in like for like sales during the first quarter of 2018.

Asda president and CEO, Roger Burnley, said: “Our 2017 accounts reflect a solid performance and a strong, well-managed business. During the year momentum returned driven by a series of planned investments in lowering prices, further improving quality and innovation in our own brand ranges and providing an even better shopping experience whether in store or online.

“Our customers have responded well to this strategy and the momentum of 2017 has continued into the first quarter of 2018.”