Asda co-owner Mohsin Issa has claimed its relationships with suppliers are at an “all-time high” and promised further investment in price as inflation in the UK eases.
In one of his first major interviews since the takeover from Walmart, he also spoke of being “more excited” at running the business than at any point since then, claiming the supermarket had finally got the monkey of its huge financial leverage “off its back”.
Having reported full-year profits of more than £1bn and like-for-like sales up 5.4% today, Issa said its key task now was to return to being the “champion of value and brands”.
“We’ve already made significant investment in price in the last couple of weeks,” he said.
“As inflation eases, we know there’s an opportunity to really go back to brands. We are historically the home of brands and we need to maintain that position.”
In January, Asda became the first supermarket to launch a discounter pricing scheme which matched both Aldi and Lidl. Meanwhile, six million transactions, 50% of the total, used its loyalty app.
Issa said the support of suppliers was vital for the next phase of investment in prices and loyalty.
“From my perspective, the brands have really embraced what we’ve been doing. They’ve been really collaborative and there is a really good working relationship. We brought Kris [Comerford] in [from Tesco] and he’s got a fantastic relationship with our suppliers. Both myself and him have invested a significant amount of time to build further on that.
“Genuinely I would say our relationship with brands is at an all-time high.”
Forecourt and convenience kings the Issa brothers’ takeover, alongside TDR Capital, has been dogged by controversy over its high leverage of debts, with more reports in the past few days that co-owner Zuber Issa is expected to sell his £500m stake to majority shareholder TDR Capital.
“We get talked about as a debt-laden, highly leveraged business,” said Issa. “But if you look now, our leverage is down to ‘three times’ and we are on track to take that further down.
“The business is hugely cash-generative and we want to take that cash leverage monkey off our back. I believe we have done that now, and we need to ensure customers see us become the value champion that is Asda’s heritage, and that’s what we are trying to deliver as we continue to focus on investment.”
Asda has also been dogged by a series of strikes and industrial action ballots in a dispute over recognition, pay and conditions spearheaded by the GMB Union.
But Issa said its recent record £150m investment in staff pay, which made Asda the highest paying traditional supermarket, was part of a proven commitment to colleagues.
“Being totally candid, I genuinely think we do the right thing by our colleagues,” Issa said. “I wouldn’t sit here and say that sort of thing lightly. People are at the heart of this great business and we continue to focus on that.
“There are snippets and there will be noise from the GMB. But if you ask the majority of our colleagues, the membership will tell you it’s not large-scale.
“The only thing we can do is to do the right thing for our colleagues. They don’t need union representation because unions don’t need to tell us how to treat out colleagues and how to be fair. We know that and we have a proven track record of doing it.
“Look at where we came from. We were lower quartile paying. We’re now upper quartile and that demonstrates our investment, bearing in mind we’re not even three years into full ownership.
“If you ask the majority of our colleagues about how the stores have benefited, we’re all about retail standards, we are about service and that’s what we want to do to put that at the heart of every store.”
Today, Shore Capital analyst Clive Black accused Asda of being distracted by its unrealistic ambition of returning to number two position in the supermarket power league, despite its share having been steadily eroded by the likes of Aldi.
But Issa stressed it was not a case of wanting to be number two “at all costs”.
“Being number two is our long-term goal, but it’s not something we said we’d do in a month or six months,” he said.
“We continue to have that as our goal, but what we’re focusing on is continuing to invest in customers and colleagues.”
As for his future, Issa said he planned to remain a hands-on owner until Asda had finished the major IT changes required following its uncoupling from its American former owner and remaining shareholder Walmart.
“I’m absolutely committed to this business. It’s even more exciting than when we did the takeover. It’s a very solid business and one we are incredibly proud of owning.
“There is an active search under way for a CEO. We are getting on with that, but there is also a big IT investment project happening, and I have had experience of that sort of IT separation job from large grocers in a number of acquisitions and it puts me in a good place to do that. That comes up at the end of this year.
“But our search is live. As and when we find someone, I’m more than happy to hand over the reins.”
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