Asda has announced plans for a major simplification of its business strategy, which will include an overhaul of a third of its UK stores and a big fight-back against the discounters on price.

Launching an 18-month programme dubbed Project Renewal on Monday (19 October), the Walmart-owned supermarket giant also revealed it planned to scrap or put on hold “non-essential” plans, including slamming the brakes on planned expansions in London, its rollout of standalone petrol stations and the development of remote click and collect sites.

The Project, which has already resulted in the loss of 29 head office jobs, will focus on improving efficiency and service in its core business.

Asda said it would accelerate some existing plans, including major investments in 95 stores, and would also push ahead with the opening of two new “dark stores” in Dartford and Heston due to open next year. However, other non-core areas, including Asda’s Business to Business sales operation would permanently close in the next few months.

Asda is also expected to unleash a major new price cutting initiative as part of Project Renewal, though it did not include details on this in its announcement today other than saying the project would “extend Asda’s everyday low price, value competitive position, further increasing its price advantage over major competitors and strengthening its competitive position against the discounters”.

President and CEO Andy Clarke said the alterations to its five-year plan (announced in 2013) revealed today would ensure Asda could act to “better address the fast changing needs of its customers in today’s market.”

He added the outcome would be a move towards “further simplifying and managing of Asda’s cost base and the laying of an even stronger platform from which to project future initiatives to deliver improving value and lower prices.”

 

Click & collect scaled back

As part of Project Renewal, Asda has decided to put back its plans to have 1,000 click and collect locations across the UK by 2018, and scrapped plans to expand its click and collect service at London Underground stations.

Among other projects in the firing line from Project Renewal are Asda’s trial of ‘Intelligent Pod’ – unmanned click and collect sites featuring chilled lockers that shoppers would be able to access 24/7 and which would offer same-day collection.

Despite operating profits rising by 1.9% to £1.013bn in the year to December 2014, Asda has seen a decline in sales and market share recently.

Its sales from stores open at least a year fell 4.7 % in the 11 weeks to 30 June, the worst performance in its 50-year history.

Project Renewal was the original name given to Archie Norman’s plans to revive Asda in the early 1990s, although Clarke’s strategy also has strong echoes of some of the rationalisation being carried out by Tesco CEO Dave Lewis, which has been concentrating on the quality of core in-store service and availability, and driving volumes.

Last week Tesco upped the ante on price with the launch of its Brand Guarantee scheme.

“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,” said Clarke.

“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.”

 

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