Asda backtracks on London expansion plans as it seeks to revive flagging sales
Asda has become the latest supermarket to backtrack on store opening plans after scrapping ambitions to expand in London in favour of reviving deteriorating sales at existing stores.
US-owned supermarket chain said it is “temporarily” slowing down the planned expansion of smaller format stores in London as well as its programme to develop more stand-alone petrol stations.
It has also put the brakes on plans to grow its click-and-collect service to 1,000 sites across the UK by 2018, including opening more lockers in London Underground stations.
Instead, the retailer said it will speed up investment into 95 existing stores that are in need of a revamp across the country. Non-core areas such as Asda’s Business to Business sales operation will also permanently close in the next few months.
The change to Asda’s five-year strategy comes after the UK’s second biggest supermarket in August delivered its worst quarterly sales performance in the 16 years it has been owned by US parent Walmart, with a 4.7 per cent like-for-like decline.
Chief executive Andy Clarke, who has come under increasing pressure to take action, described the fall as a “nadir” and insisted there were signs of recovery after improving the quality and price of its products.
However today’s announcement suggests that further drastic action may be needed to turn itself around as competition among the supermarkets and their discount rivals Aldi and Lidl intensifies.
The move also follows Morrisons’ decision under new chief executive David Potts to sell its convenience store business altogether and focus on revive its core supermarket business. Tesco has also closed 43 stores this year, scrapped 49 development projects and is in the process of selling of the land in a bid to bolster its balance sheet. Sainsbury's has similarly slowed its store opening programme.
Last week, Asda announced it has poached Sainsbury’s retail and operations director Roger Burnley to be its new chief operating officer and support Clarke as his right hand man. The move also puts him in prime position to take over from Clarke should he step down.
Despite being the first of the big four in November 2013 to announce a major £1bn price-cutting programme, the retailer has continued to lost market share to the German discounters Aldi and Lidl. The most recent Kantar data shows it now has 16.7 per cent of the market compared with 17.3 per cent the same time last year.
Clarke said: “Asda is a strong and profitable business which has built its success on delivering everyday low prices and good value to customers through efficient, friendly and well-managed stores, This is a winning strategy and we are determined to stick with it.”
“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. We started that journey today with our colleagues and over the coming weeks we will work on the detail in partnership with our suppliers,” he said.