Asda boss: This will be the toughest ever year for supermarkets

Asda boss: This will be the toughest ever year for supermarkets
The boss of Asda has warned that supermarkets face their “toughest” ever year as they battle falling sales and a brutal price war.

Andy Clarke, chief executive of Asda, told staff in an email that the retailer is facing “even greater challenges than last year so we need to further change and adapt the way we work”.

Last week, Dave Lewis, the new boss of Tesco, unveiled a turnaround plan for the retailer that involves closing 43 stores, scrapping 49 new store developments and shutting the company’s defined-benefit pension scheme.

However, analysts at S&P said: “In our view these measures do not go far enough to support an investment-grade rating, considering the challenges the group faces in sustainably turning around its operations and materially improving its profitability in the highly competitive UK grocery market.”

S&P said a cancellation of the dividend cancellation, cuts to future capital expenditure and the potential disposal of the Dunnhumby analytics business could bolster Tesco’s finances by £3bn. However, it warned that UK like-for-like sales will continue to fall in 2015 and 2016 and that profit margins will be squeezed, suppressing the benefits of the initiatives.

Bill Ackman, the billionaire activist investor, said on Wednesday that he has considered investing in Tesco following the fall in its share price. However, he decided against buying shares because of “difficulties with retail” in the past and the “structural changes” in the industry.

“When Warren Buffett is giving up there’s got to be a lot of negative sentiment,” Mr Ackman said of Berkshire Hathaway selling down its stake in Tesco.

Mr Clarke said that Asda was responding to the challenges in the industry by streamlining its management team.

Barry Williams, the chief merchandising officer for food, has been promoted to chief customer officer, while Andrew Moore, the head of Asda’s George clothing business, will also take on responsibility for food trading. Steve Smith, the current chief customer officer, is returning to a role at Asda’s US parent company Walmart after a secondment in the UK.

Mr Clarke told Asda staff in an email: “As we enter 2015, we are facing even greater challenges than last year so we need to further change and adapt the way we work.

“With that in mind, it’s vital that I provide stability at the top of the organisation and consistent leadership from January and throughout the year.

“These are demanding times for anyone working in the retail industry. Whilst I am proud to know that our business is leading the way for large retailers in addressing the structural changes in our market, I know that being first means we are making tough decisions and putting our heads above the parapet, which can feel uncomfortable.

“These changes will enable Asda to prosper in an increasingly competitive market by enabling faster decisions through streamlined structures where colleagues are empowered under the leadership of fewer, bigger leadership roles.”


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