The most surprising news from Walmart’s fourth quarter earnings today is that Doug McMillon, chief executive of the global retail giant, came to the UK a few weeks ago and did a walk around a few Asda stores and no one found about it.
After a little digging, it is understood that McMillon often visits the UK in January after his annual sojourn to Davos for the World Economic Summit and this year was no different. However, one imagines the Walmart boss would have been paying closer attention this time around as he visited stores in Leeds and Wakefield, given that the struggling grocer has a new-ish chief executive in Sean Clarke who is trying to turnaround the business.
Clarke has been in his post for six months and he faces the task of trying to revive a grocer whose sales have been heavily impacted by the growth of the discounters, Aldi and Lidl, and better performances from its “Big Four” rivals. The fourth-quarter figures for Asda are not pretty – comparable sales are down by 2.9% – and for the year they are even worse, with sales falling by 5.7% on a like-for-like basis.
However, Asda’s performance in the final quarter of the year was not quite the bloodbath that the market was expecting. This would seem to indicate that changes being introduced by the press-shy Clarke and his new executive team, which includes Roger Burnley, the former Sainsbury’s executive turned Asda chief operating officer, are starting to work.
Asda invested £65m in the final quarter to lower prices and improve quality and store service levels. There has been a renewed focus on improving the quality and range of its fresh produce sector while its overall range in its stores is being simplified. Its Extra Special own brand range is also selling well which, in part, helps explain why 140,000 shoppers returned to Asda towards the end of the year.
The Walmart-owned grocer is still a long way from being in rude health and it is facing structural challenges which often seem nearly insurmountable. This is a supermarket business without a convenience division when convenience is the fastest growing part of the grocery sector in Britain. Asda’s store portfolio consists of a number of big stores in a British grocery market which is already at over-capacity and while it has an online business it is nowhere as polished as most of its rivals.
The road is only going to get tougher for Asda too, as Tesco’s turnaround continues and as rising costs and inflation start to hit consumers’ wallets. This is why McMillon is keeping a close eye on the business. It is also why he told investors today that the US retailing giant was “urgently” addressing the challenges facing its Asda business, which for many years has been a profitable cash cow for Walmart.
However, challenges aside, there are signs that Asda’s return to retailing basics, from better pricing and stock availability to upgraded store standards, is starting to yield the first tiny signs of recovery.
Deirdre Hipwell is retail and M&A editor at The Times
