ASDA launches business revival plan

Asda has launched a revival plan to revamp big stores, cut prices and shelve the expansion of internet click and collect services after recording its worst sales performance in its 50-year history.

Naming the plan “project renewal” – in a nod to former boss Archie Norman’s 1990s overhaul of the business that culminated in its takeover by US group Walmart – the supermarket said the 18-month drive would include making further cuts in everyday prices and accelerating improvements to 95 of its biggest branches while slowing expansion of smaller outlets in London.

Asda also said it would halt plans to open more non-store “click and collect” sites for internet shoppers to pick up goods. The group has 620 such sites, mainly at stores but also elsewhere, including 24 at London Underground stations and a pilot robot-operated “pod” in St Helens, Merseyside.

Other changes to Asda’s five-year strategy include putting ambitions for more standalone petrol stations on hold and closing an operation that deals directly with business customers.

The group, which vies with Sainsbury’s to be Britain’s second-biggest supermarket, said its rethink was in part driven by the need to combat discount rivals, led by the German low-cost operators Aldi and Lidl.

Asda and its main rivals Sainsbury’s, Tesco and Morrisons have been drawn into a ferocious price war while seeking to keep up with shoppers’ move online, which makes little money.

The chain had its worst quarterly period of trading in the three months to the end of June as it was hit by fierce competition and a market flooded with discount vouchers from rivals seeking to lure cost-conscious shoppers.

Sales in established stores fell by 4.7% and Asda, which had survived the price war relatively unscathed for some time, became the worst performer of the big four grocers.

It has also been affected by the stirrings of a revival at Tesco, Britain’s biggest grocer and a direct competitor at the cheaper end of the market.

Andy Clarke, Asda’s chief executive, said the chain’s past success was based on well-run stores and low prices and the new plan would concentrate on that core aim while sidelining surplus operations. Asda said there would be 29 job cuts at head office as a result.

Clarke said: “Over the last two years, we have shown that we are ready to make necessary and early changes to match that ambition to the demands of our customers, especially at a time when the market is clearly undergoing permanent and rapid structural change.

“We need to simplify what we do by prioritising the first line of our strategy – improving our core business and pausing activity in other areas so that we are not spread too thinly.”

Clarke said in August the business had been through the worst and was back on an upward trend. He said Walmart backed his resistance to being drawn into issuing unviable discount vouchers simply to get customers into stores.

He had emphasised the need to offer more services for online customers. Click and collect has been one of the big growth areas in retail because it lets customers pick up their online purchases when convenient instead of waiting at home for a delivery van.

Clarke has been placed under greater pressure after Asda hired Roger Burnley, Sainsbury’s head of retail and operations, as chief operating officer, starting next year. Burnley will work as Clarke’s right-hand man but he is tipped as a potential replacement for Clarke, who has been in the job since 2010.

Walmart, historically the US’s biggest retailer, issued a profit warning last week that highlighted competition from Amazon and other rivals as well as the cost of increasing wages after a campaign put it under pressure over low pay. Asda, like other UK supermarkets, faces paying higher wages to comply with the chancellor’s “national living wage” which comes into effect from April next year.

Source : Sean Farrell – The Guardian
www.theguardian.com/business/2015/oct/19/asda-reviews-five-year-plan-after-sales-hit-lowest-ebb