Analysts lament lack of succession planning, but welcome leadership change

ASDA’S expedited change of chief executive was prompted by poor performance say analysts, with potential strife at the top following the u-Turn on who would replace Andy Clarke when he steps down from the top role.

Former Sainsbury’s executive and soon-to-be Asda COO Roger Burnley was thought to be the obvious choice, and Andy Clarke appeared to confirm it last week.

Analysts such as Clive Black of Shore Capital have suggested that the succession planning was not so seamless as Walmart executives would have liked.

He said: “Wal-Mart is clearly not happy with what is happening at Asda, with good reason given very poor recent trade.”

Mr Black said that the appointment of Sean Clarke over Roger Burnley shows some internal strife within Walmart.

He said: “To the extent that this is seamless succession planning is a discussion point, noting that the perception was, perhaps wrongly, that new COO Roger Burnley may be Andy Clarke’s replacement.

Mr Black said that Andy Clarke’s “reading of the market has been right but we do not believe that he has always had the tool kit to compete on the basis he would have liked. Asda’s poor recent performance is very much to do with Walmart to our minds.”

In May, Walmart announced a 1% increase in first quarter revenue, bucking the trend that is dragging down its US contemporaries. However its international business has always seemed to lag behind.

David Gray of Retail Planet said: “Performance is definitely a factor in Andy Clarke’s departure, in the chief executive job you can only preside over a certain number of quarters of decline. We saw it with Dalton Philips at Morrisons.

“Andy Clarke was looking to move on anyway and this consistent underperformance may have brought it on a bit quicker than initially planned.

“This move is probably a good thing for Asda, it has gone from one from best performing to consistently the worst among the Big Four under Andy Clarke and it makes sense to looks for fresh hands for the UK business.

“The fact is that Asda has working hard to protect profits than investing in price reduction to grow market share.”

Mr Gray said it was a “fine balance” to get right, “but you’re not really getting anywhere if sales don’t grow.”

“Asda have taken their eye of the ball in terms of pricing, because they have been protecting profits, whereas competition has tightened up. Tesco and Morrisons are placing money in lower prices, even Sainsbury’s is pushing on EDLP (Everyday Low Price) when they haven’t normally been involved in price wars.

The analysts agreed that the market has become incredibly competitive in the UK, with Lidl and Aldi coming up from the bottom and M&S and Waitrose pushing down from the top.

Phil Dorrell of Retail Remedy said that there was a lack of strategy to combat the discounters and recover share as Sainsbury’s has done and this ultimately cost Andy Clarke his job.

Mr Dorrell continued: “At a time where someone comes in and steals your point of difference retailers have to adapt and having only one key marketing message of price over the last 10 years has led to them being very vulnerable.

“Fighting the discounters and the other big 4 on price was short-sighted in this market environment, especially when you consider the many other propositions Asda could have focussed on, that they could differentiate with.

However, Mr Dorrell did say: “Asda will bounce back and come out strong, not just with price but with a divergent offer the discounters and other Big Four grocers find it hard to replicate, it remains to be seen if the new Clarke imported from Wal-Mart China has this capacity, we will wait and see, its competitors will not be waiting.”