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April 12, 2010

UPDATE: UK: New Asda CEO will need to step up growth – analyst

Asda will need to be more aggressive in its growth strategy with the appointment of a new CEO, according to analysts.

Asda will need to be more aggressive in its growth strategy with the appointment of a new CEO, according to analysts.

The UK’s second-largest retailer announced this morning (12 April) that Andy Bond is to step down as chief executive of the business.

Bond will leave his role as president and CEO of Asda and take a new job as chairman of the retailer’s executive committee, the company’s parent Wal-Mart said this morning.

Industry watchers have expressed surprise at the announcement but Verdict Research analyst Neil Saunders said the news has come at an important time.

“Under [Bond’s] leadership, Asda has seen very, very strong growth. Recently that growth has slowed down and Asda hasn’t really performed as well as it would like. I don’t think the two things are linked though. I don’t think he will have stepped down or been pushed because of that, I think it’s probably more to do with a wider view of the business and a change in Asda’s strategy in the UK,” Saunders said.

He argued that Asda’s had recognised that it has to be “more aggressive” in targeting growth.

“I think what we will probably see as we go forward is much more store expansion but I also think it is likely that they will look to acquire another player in the general merchandise space to really up the scale on that side of things,” Saunders said. “Wal-Mart has got the cash and financial muscle to do that and it’s the only way they’re going to generate very superior growth in the UK.”

Saunders added that the next candidate to replace Bond is likely to be an internal one, an opinion reiterated by Shore Capital analyst Clive Black.

“There are a team at Asda of senior lieutenants who undoubtedly will be looking at the role, and there may be some people at Wal-Mart that may want a crack at the UK,” Black said.

He added: “There’s a guy running Wal-Mart Canada called Dave Cheesewright who is ex-Asda, and then there is also the usual suspects within Sainsbury’s, Tesco, Morrisons, Marks and Spencer and the rest so there will be no shortage of names in the frame – but I suspect an internal appointment will be made more than an external one.”

Black added that the operational strategy of Asda is likely to remain broadly the same but he said he believes that speculation that the retailer is now looking to shift its focus to non-food may have caused a rift with management.

“From a trading perspective I think it will be more of the same. Whether there is a division strategically…there has been a lot of speculation at the weekend that Asda is looking to try and buy Home Retail [owner of Argos and Homebase].

“Whether there is any form of disagreement there we will never know but clearly Asda does harbour ambitions in non-food and on the web and to all extent, one can speculate that there are divisions within Asda’s boardroom, but from a growth perspective, we would expect non-food to be a more material element of the business in the future than food.”

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