‘Boring’ Asda prepares fightback

The retailer made its admission at a supplier event last week, according to analysts from broker JP Morgan who attended.

It came just days before parent Walmart’s full-year update this Thursday, and after snow and promotions by rivals which are thought to have hit Asda’s performance over Christmas and in January.

Asda directors said a fightback is planned as it addresses the promotonal environment, adds excitement to the shopping experience and seeks growth through new routes.

In a note to investors JP Morgan said: “Asda is unhappy about its latest underperformance and believes this is due to the high level of promotions in the sector which clouded its every day low price image. Management said they became boring with innovations within store and the weather had a negative impact on its big store format.”

Asda chief executive Andy Bond said the retailer “will do whatever it takes to continue to grow ahead of the market”, according to JP Morgan. The broker said Asda partly intends to address performance “by effectively ordering suppliers to reduce the level of promotions in the UK”. Asda also said it would expand into smaller stores and leverage scale with parent Walmart

While Asda will retain its EDLP stance, it intends to complement that by running more events such as ‘The Big night in’ to generate excitement. The retailer aims to bring to the shopping experience more of a ‘carnival’ experience so children would not be bored in stores.

The grocer has found that its range rationalisation had gone too far. When, for instance, it reduced a range from 100 to 70 items , 40 would sell quite well but the remaining 30 had limited appeal to customers despite improving the company’s cost base. The retailer therefore plans to re-expand ranges where necessary. 

Asda said growth in the UK would come less from big stores in future, when 75% is expected to come from smaller shops, online and non-food. The grocer wants to open 100 smaller format stores in the next three to five years.

The grocer acknowledged that the loyalty cards used by Tesco and Sainsbury’s were having an impact and Asda would ‘do something about it’.

Asda declined to comment.

Separately, Asda has asked the political parties to take part in live web debates before the General Election, telling them they must listen to ‘Asda Mums’.

“In many ways Asda customers reflect the whole country – we have stores in almost every constituency and our customers are represented by MPs from all political parties,” Asda said on its website. “While we’d never take sides in an election we do want our political leaders to hear from you so they can make the right decisions for the country.”