Asda slows down convenience store expansion in London

<p>The decision is part of a move to simplify the retailer.</p>

Asda has said it will shelve its plans for London expansion, as well as the roll-out of click and collect sites.

The move has been made in a bid to cut costs. In August, the big-four supermarket reported its worst quarterly figures in its 66 year history. Last week, the retailer's parent company, Wal-mart, recorded its worst one-day share price loss in 15 years following a profit warning.

Andy Clarke, chief executive at Asda, called the cost-cutting programme "Project Renewal". He said the move was an attempt to simplify the retailer and focus on improving the core business. It will "better address the fast-changing needs of [Asda's] customers in today's market", he added, explaining that the project will involve a comprehensive review of the company's pricing structure and ranges in order to keep up with the competition of discount supermarkets like Lidl and Aldi.

Asda will also be slowing down its plans to open more stand-alone petrol stations – it had originally planned to have 100 new stand-alone stations over the next five years.

Non-essential expansion on hold

Mr Clarke says that Asda's new focus would be on larger superstores and customer service. he added that non-essential expansion would be put on hold. The company had already announced investment in 95 of its biggest stores. It will also be slowing plans to develop out-of-store click and collect sites – previously, the company had planned to have 1,000 click and collect locations by 2018.

Two new superstores opened in London this year and three more are planned for next year. After that, however, expansion in the capital will begin to slow.

In addition, the company's business to business sales operation will be closed. Nearly 30 people have been made redundant from the company's head office in Leeds as a result of these changes – the total head office workforce is around 3,500.

"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. This is a winning strategy and we are determined to stick with it," Mr Clarke said.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.