Asda confident strategy is working as it embarks on major restructure

YORKSHIRE supermarket giant Asda is confident that its strategy to redefine value retailing in the UK is working.

The Leeds-headquartered retailer reported a return to like-for-like sales growth yesterday when it announced its results for the first quarter for the 15 weeks to April 20.

It also outlined proposals to ensure its stores are “fit for the future” and announced a restructuring plan which will put more than 4,000 managerial jobs into consultation, but will create 900 new customer facing roles.

The move will see Asda get rid of some department manager roles and create section leader roles which will be customer facing positions. The proposal is to help place more focus on e-commerce, such as click and collect services, and has already been tested in 20 stores, Asda said. It said these stores are performing ahead of expectations.

Asda’s CEO and president Andy Clarke said: “We want to put more people in front of the customer. This is a reorganisation. Some people at the management level will move into different roles but some will leave us – we are working with them on this over the course of the 12 weeks.”

Asda said any cost saving form the reorganisation will be passed on to the customer and the business will share further news in Q2.

Turning to its results, in the 15 weeks to April 20, Asda grew sales, excluding petrol, on a like-for-like basis at 0.1%. Total sales grew 1.3%.

Clarke said: “In what remains a challenging market I am pleased to see that our strategy is paying dividends. Over 18 months ago we recognised the beginnings of a structural shift in the retail market and by looking at our business and how it needed to change we have been able to get ourselves ahead of the curve and implement a strategy that is delivering real value for our customers and growth for our business.

“We are in the first few months of a five year journey, but I am confident that we are on the right path – and the numbers we are reporting today, as well as recent Kantar and Nielson data – show that we are moving in the right direction and already making gains.
 
“But we know that we can never be complacent.  Our sector is constantly changing, and we have to be prepared to change with it, whilst remaining rooted in our strong heritage of investing in Everyday Low Prices, operating an exceptionally efficient business model and doing the right things for our communities and colleagues.”

Asda said it has continued the strength of its price position against large retailers and a narrowing of the gap to the discounters, as well as double digit growth in its newly launched George Home range.

“Our strategy is working. We’ve had a clear strategic change of agenda since last year and are clear we have a strategy, not a slogan,” Clarke added.

Clarke said Asda’s ‘price lock’ initiative is delivering real value and said it its market share has increased by 2%, while Morrisons, Tesco and Sainsbury has  fallen by 1.8%, putting Asda 3.8% ahead of them. “This underlines that our strategy is working” Clarke said.

Chief finance officer Alex Russo said Asda has started to close the price gap from the discounters and has strengthened its price position. “It has been a challenging market and very competitive but we have set out to conclude our plans and we have a clear set of actions for the next few quarters,” he said.

“It has been a solid strong performance for the quarter and we’ve made great progress, but there is more work to do.”

Russo noted that market share data showed that Asda benefited from the strongest sales in the Big Four over the important Easter period. Russo also outlined Asda’s continued leadership in Grocery Home Shopping – reporting further market share growth to 19.2% in this important growth channel.

Newly appointed chief operations officer, Mark Ibbotson, who has been at the centre of Asda’s retail operations for over a decade outlined how the business continues to invest in driving efficiency in its operations and is looking to make £1bn of efficiency savings over the next five years as part of its strategic objectives. He gave examples of investments large and small in operating activity – including a £7m saving in waste, £26m investment in energy efficient lighting in stores and multi-million savings through ‘tweaks’ to its supply chain management.

Clarke added: “We are a business in growth. We’ve got market share growth, our strategy is in place and is gaining momentum.

“We are confident that what we have put in place will give us a solid performance over the year.”