‘Messy and dirty' Asda stores risk turnaround, supermarket warned
Asda's turnaround plan risks failing unless the supermarket drastically improves some of its 'messy' stores, bosses have been warned.
Analysts at Shore Capital said a recent visit to Asda stores in Liverpool and Knowsley, Merseyside, showed that 'lots and lots and lots' needed to be done getting its stores up to scratch, as pressure mounts on new chairman Allan Leighton to overhaul the struggling business.
They said that one of the stores visited was 'dirty and quite frankly a mess', adding that standards were 'patchy across all outlets'.
Photos taken inside Asda's supermarkets showed bare fridges and empty shelves, and a shortage of fresh produce including vegetables and chicken.
The analysts described one of the supermarkets visited as having 'quite awful store standards and availability'.
It suggested items where Asda had lowered prices were a particular issue, picturing depleted frozen aisles and writing: 'Keeping up with Rollback [Asda's promotional pricing scheme] seems a challenge.'
They added: 'We see this as a particular no-no, as to be successful Asda simply has to recruit new customers, a costly process when you do not have product to sell them.'
Asda has been battling to stem a continuous decline in sales. Industry data revealed this month that Asda sales were down 5pc in the latest four weeks to Feb 23. It follows years of disappointing performance at the supermarket.
Its market share has declined to 12.6pc, compared with 14.8pc when the company was taken over by private equity giant TDR Capital and the Issa brothers in February 2021.
Asda brought in Mr Leighton, its former chief executive, to helm the business as chairman in November. It had been previously run by co-owner Mohsin Issa.
The retail veteran has been attempting to halt the decline at the business in recent weeks, claiming his efforts will make Asda competitive again.
Mr Leighton last week unveiled plans to embark on a spending spree within stores, admitting that the company had been 'struggling'.
Analysts at Shore Capital said investment was needed across Asda's stores, not just on prices, 'to stabilise a business that has been somewhat adrift in recent years'.
Mr Leighton is planning a 'substantive and well-backed programme of investment', targeted towards lowering prices, improving availability and updating stores. He said this was not about a 'quick fix' for the business.
Asda declined to give the scale of the investment, although analysts have suggested it could be as much as £900m over the next three years.
The supermarket said the investment would result in a 'material reduction' in profitability. Asda posted pre-tax profits of £180m in 2023 on revenues of £25.6bn. It has not yet published pre-tax figures for 2024.
Shore analysts said in their note on Thursday that lower grocery sales and higher costs after the Budget meant that 'Asda's profits were going to notably fall anyhow'.
A spokesman at Asda said: 'We're on a journey to make Asda the number one choice again for busy hard-working families.
'Since launching Rollback and investing to put more hours into stores, our price advantage over the traditional big four has widened and we have seen improvements in availability and the shopping experience. This is just the start of a serious long-term commitment to delivering the value our customers demand.'
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