Asda boss Andy Clarke says Tesco is having ‘heart surgery’

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Tesco’s new chief executive is performing the equivalent of “heart surgery” on the supermarket chain as he tries to revive it, according to the boss of rival retailer Asda.

Andy Clarke, now the longest-serving boss of a British supermarket after the exit of all his major rivals in the past year, said that Dave Lewis also needed to wean Tesco off the short-term boosts gained from handing out discount vouchers, which he likened to quantitative easing – the Bank of England’s electronic money-printing programme.

Clarke said: “Dave is not tinkering around the edges. He is doing heart surgery to make the business fit again.”

He said Tesco had been boosting its sales figures by using lots of discount vouchers and warned: “Any business can only do ‘quantitative easing’ so long ... vouchers are a short-term solution.”

Asda has moved away from voucher offers in favour of straightforward price cuts. Clarke’s comments came as he explained how Asda was revamping stores to try to win market share from Tesco, Morrisons and Sainsbury’s and offset the impact of losing shoppers to discounters Aldi and Lidl.

Asda and its big-three rivals all lost market share over Christmas; Asda has earmarked up to £170m to revamp its 170 medium-sized superstores and adapt them to shoppers’ rapidly changing habits.

Touring a store in his home town of Grantham, Lincolnshire, one of two where Asda is testing new ideas, Clarke said he was giving more space to fresh food, hot food and health and beauty products. He has also taken out a fifth of the space devoted to goods now mostly bought online, such as televisions, DVDs and CDs.

Asda has also imported a cheap café idea from its Walmart parent, charging £1 for everything on its limited menu, which includes pizzas, salads and drinks.

After the changes, sales at the Grantham store are up nearly 1% year-on-year; this is a better performance than most large supermarkets, which have seen sales decline in the past 18 months.

Clarke said the new-look stores would help Asda take on the discounters by offering a wider range of products and services especially in health and beauty; improving the quality of its goods, particularly in homewares; and linking more closely to online shopping, where Aldi and Lidl cannot compete, offering order screens and click-and-collect facilities.

Asda has already pledged £1bn of price cuts, and Clarke has said he could go further than that amid an intense supermarket price war.

Clarke said Asda had no intention of closing stores or scrapping new developments, as Tesco, Morrisons and Sainsbury’s have done. Instead, he said, Asda intended to open more stores, particularly small and medium-sized supermarkets.

But Clarke conceded that Asda was considering following Tesco by splitting some of its largest stores and renting parts out to other retailers. Asda has already tried “building a wall” across a store in Glasgow to reduce the size of the shop and see if it could improve productivity. A retailer has not been brought in to take on the empty space in Glasgow as yet, but Asda plans to do so at another store in the north-west, thought to be Eastlands in Manchester, later this month. Clarke said where Asda had moved into store space made available by B&Q in the past, both retailers were trading really well and retailers now needed to create similar kinds of destinations.

Property sources said Asda was looking at reducing the size of as many as 10 stores including Pudsey in Leeds, Fosse Park in Leicester, and Watford in Hertfordshire.

Powered by Guardian.co.ukThis article was written by Sarah Butler, for The Guardian on Thursday 5th February 2015 16.14 Europe/London

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