Asda, Tesco look to the horizon

The sun has shone across much of England in recent days but, since Thursday, restrictions on flying in our region have meant the skies have been empty of planes.

Thousands of holidaymakers planning to return after an Easter break have been left stranded and have been battling back to the UK via land and sea. The cost to the airline industry, already dragging itself back to its knees after the downturn, and the cost to business as a whole continues to spiral the longer the restrictions continue.

In our sector, the ash cloud has hit a key date in the retail calendar. This year's World Retail Congress, to be held in Berlin, has been postponed due to the flight restrictions. Organisers said this morning (19 April) that they plan to reschedule the event for October.

There has also been concern about the impact the eruption will have on imports of fresh produce into the UK, particularly on the air-freighted shipments of more exotic lines. UK retailers have insisted that, right now, their stock levels are good but they have warned that, should the flight restrictions continue, supplies of some exotic fruit could be compromised.

“If this drags on, we may see some issues with things that come from a little further afield like exotic fruit but until that actually happens, our stock levels are very good,” Asda told us this morning. Should the restrictions continue, retailers could look to stock more UK produce.

Asda, meanwhile, is determined to dispel the clouds surrounding its own business after a poor Christmas and last week's announcement that Andy Bond would step down as CEO. 

Addressing analysts at Asda's HQ on Thursday (15 April), Bond dismissed suggestions that he was pushed by parent company Wal-Mart and then insisted the outlook for the retailer is bright. As part of a programme for expansion, Asda plans to open 100 small supermarkets over the next five years in a bid to become the "clear" number two food retailer in the country. 

Asda's non-food strategy seems to be more aggressive than its grocery programme but, tellingly, the retailer wants to further tap into the way Wal-Mart sources its products globally - which could benefit the UK group's returns, even in a challenging grocery market.

Tomorrow, arch-rival Tesco reports its annual results. Analysts expect Tesco's UK sales and earnings to have grown in what has been a tough year for the business. However, Tesco's international operations, particularly in Asia, are likely to have seen profits accelerate faster than in the UK. 

Nevertheless, there remains questions for Tesco to answer on its international business, not least on how its stores in Ireland have been affected by the recent slump in consumer demand – and on how far its US business Fresh & Easy has progressed to the point where it could break even.