Asda, Britain's third largest supermarket, "lost the plot" but can be fixed, its chairman said as it reported another slide in sales and warned measures in last week's budget would cost the company £100 million (€120.5 million).
The group, majority owned by private equity firm TDR Capital, said its like-for-like sales fell by 4.8% in the third quarter to end-September, a slight improvement on the previous quarter's 5.3% dip but still a major underperformance versus industry leader Tesco and No. 2 Sainsbury's.
"We've slightly lost the plot in terms of giving them (customers) what they want on a daily basis," chairperson Stuart Rose told Reuters.
"Our stores, they're not as nice as I'd like them to be in terms of the experience and the visuals. They're not as good as they should be in terms of the service we give our customers on availability and we've probably lost a bit of sharpness on price," the veteran retailer said.
"They are operational things, which any shopkeeper can fix," added Rose, who assumed the executive responsibilities of co-owner Mohsin Issa in September.
He said a £30 million (€36.1 million) investment in more worker hours had made a difference.
"That's been noticed by our customers," he said, noting a further £13 million (€15.7 million) will be invested this quarter.
Debt
Analysts say Asda has been hampered by the cost of servicing the debt it took on when Mohsin and Zuber Issa and TDR Capital bought 90% of the group from Walmart in a £6.8 billion (€8.2 billion) deal in 2021. Net debt was £3.8 billion (€4.6 billion) at end-Sept.
Since the deal, Asda's share of the grocery market has fallen from 14.1% to 12.6%, according to market researcher Kantar.
Rose said management had been absorbed by a doubling in store numbers to 1,200 with an expansion into the convenience market and by a technology migration from Walmart.
He said National Insurance changes would cost Asda £100 million (€120.5 million) next year and like other retailers warned "it will probably be inflationary to some degree."
Analyst Comment
GlobalData said in a note that Asda is entering the golden quarter in a perilous position as it suffers further revenue declines.
Eleanor Simpson-Gould, senior retail analyst at GlobalData, stated, "With a fresh leadership team at the helm, the grocer must navigate a challenging transformation, which appears to be intensifying amid the grocer’s plans to cut 500 head office roles. Indeed, the grocer is facing a tumultuous battle to regain a foothold in the UK food and grocery market.
"Up against internal challenges, a worsening financial performance and competition from both ends of the pricing spectrum, Asda’s future looks bleak, and the threat of market share encroachment by Aldi is more threatening to the grocer’s position in the UK food and grocery market."
Read More: Aldi Poised To Displace Asda As UK's Third Largest Grocer Within Five Years
News by Reuters, additional reporting by ESM.
