Asda’s three new priorities to turnaround tumbling sales and evaporating market share

Analysts and experts had been speculating for some time Asda was in a rut. However, this week’s financial results for the first half of the year highlight that the retailer’s problems run deeper than a rut – maybe all the way into a hole.

In the second quarter, Asda revenues slumped 2.2% to £5.3bn, excluding fuel. Like-for-like sales were even worse, down 5.3% in the quarter. In the first half, Asda’s total sales were up 2% but like-for-like sales fell 2.1%.

That compounds months of worrying Kantar market share data, which has shown Asda consistently to be one of the few food retailers losing customers.

“We recognise that the results in the second quarter, in particular, aren’t where we want to be,” chief financial officer Michael Gleeson said, but he insists the owners and management have the plan to turn things around.

“We’re not sitting here, looking at our Q2 performance and saying everything’s fine. We recognise that collectively we should and can do more,” he said.

Three new focuses

In a bid to get back to sales and market share growth, Asda will be shifting its strategic focuses for the second half of the year to: customer satisfaction; enhanced product availability; and a renewed trading plan.

On customer satisfaction, Gleeson says Asda has earmarked £30m to invest in more staff hours to improve the experience of shopping in stores and a further £50m in a wide-ranging store refurbishment programme.

In terms of availability, while Gleeson wouldn’t give a figure, he said the retailer would focus on 1,000 core grocery products that “account for about a third of our sales”.

He also defended Asda’s record on investing in price, despite slipping sales. He said the grocer had spent £70m on reducing the prices of 120 products in May.

Gleeson said the Asda Rewards app would play a central role in the renewed trading plan. He said: “In just two years, I think we’ve created a differentiated loyalty scheme that’s based on money, not points.

“It isn’t linear. It’s based on shopping missions and individual products. Customers have responded well to it, and it continues to grow. Clearly, Tesco and others have gone down the line of member pricing. Whether we do that at some point in the future, we’ll wait and see.”

_­­While a focus on the customer, availability and trading sounds like some of the most basic tenets of retailing, Gleeson dismissed notions that the supermarket has “taken its eye off the ball”.

“From time to time, it’s right to just stand back a bit and reassess. It’s a completely normal thing to do. Grocery retailing is such a fast-moving sector, you do have to make those assessments all the time and think about where best to focus your investment. I think it’s completely appropriate that that’s what we’ve done,” he said.

In search of a CEO

Gleeson also said some of Asda’s recent travails were a result of the ongoing IT project it’s working through in a bid to finally separate itself from former parent company Walmart’s system.

“We’re still going through this significant IT transformation that we call Project Future,” Gleeson said. “It’s a complete separation from Walmart. It’s 2,500 systems that we’re changing over.

“After two years of planning and designing, we started implementation in the first half of this year and since then we’ve achieved a huge amount. There’s still more to do but it’s worth recognising there’s been a lot of change going on in the first half and this programme will be finished in the second half”.

Shopworkers’ union GMB blamed the rollout of Project Future for thousands of Asda workers being incorrectly paid during the year.

There have also been reports of low staff morale at the grocer, following the leak of the retailer’s annual staff survey in which just 47% of respondents expressed any faith in the long-term strategic plan of co-owners Mohsin Issa and TDR Capital.

With Asda still searching for a new chief executive, Gleeson said Issa, TDR Capital and Asda’s board have “built a strong leadership team” capable of running the business while a new chief executive is sought.

He said: “Asda continues to attract top talents. We’ve had people like Matt Kelleher just join as our new chief digital officer who brings nearly 30 years of retail experience. David Devany is joining us from Iceland as our new vice-president of ecommerce, and Matt Heslop will be coming in from Lidl.

“We are attracting very experienced, UK retail talent to Asda. And we’ve been very clear that Mohsin will be stepping back once the right candidate for the CEO role has been identified.”