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Asda's CEO Swap Can't Cure A Sales Struggle: Gadfly

Published on Oct 31 2017 12:30 PM in Retail tagged: Trending Posts / Asda / Sean Clarke / Roger Burnley

Asda's CEO Swap Can't Cure A Sales Struggle: Gadfly

Another year, another Asda CEO.

The UK arm of Walmart Stores appointed Roger Burnley as chief executive officer on Monday, taking over from Sean Clarke.

Burnley's route to the top job has been a circuitous one. Recruited from Sainsbury's, he was named Asda chief operating officer two years ago, paving the way for him to succeed then-CEO Andy Clarke in the next two to three years.

But in June 2016 - just days after confirming that Burnley was likely to follow him - Andy Clarke was ousted and long-time Walmart executive Sean Clarke (no relation) slid into the top role.

Asda certainly needed - and still needs - some radical surgery. In the preceding year, its sales had fallen behind those of its so-called 'big four' supermarket rivals - Tesco, Sainsbury's and Morrisons.

Asda was always known for its cheap prices. However, when the German discounters Aldi and Lidl began to undercut it, sparking a vicious price war in the broader grocery sector, it had little to fall back on.

Sean Clarke got back to retail basics, cutting prices and improving the quality of products. It had already made big cost reductions under Andy Clarke. And these actions had started to pay off. Asda recorded its first same store sales growth for three years in the second quarter.

But Burnley takes over at a delicate time.

UK Retail Market

UK consumer spending is already being squeezed by inflation outstripping wage growth, and a central bank interest rate increase could exacerbate this pressure.

Meanwhile, Aldi and Lidl are showing no sign of curtailing their expansion. Tesco's buying power should be boosted by its purchase of Booker, while Morrison is also getting its act together.

The new CEO is a respected retailer with a common touch. He should chime with Asda's customers and employees.

But as Gadfly has argued, Walmart should look at a sale of Asda, which could be worth about £8 billion to £10 billion, based on its property and the valuation of UK supermarket rivals.

With the twin headwinds of competition from Amazon and the arrival of Lidl in the US, it has enough to be getting on with in its domestic market.

For years Asda's UK television advertisements featured a cheeky image of how the chain could leave customers more money to spend elsewhere, namely, a succession of shoppers tapping the back pocket of their trousers.

If Burnley can manage to nurture Asda's nascent recovery just enough to appear that the parent is not selling out at the bottom, then that gesture might apply to Walmart's coffers too.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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