Last updated 22 April 2023
Asda Group
Asda is one of the largest grocery retailers in the UK, with over 500 stores, around 165,000 staff and annual sales of more than £20 billion.
Financials
In 2022, like-for-like sales growth fell by 0.2% but growth was recorded in the final two quarters of the year after two successive falls in the first half of last year. Excluding fuel, sales slowed to 0.1% (2021: 0.6%) to £20,452 billion (2021: £20,424 billion) and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell to £886 million (2021: £1,170 billion).
To view the financials for Asda Group Limited, visit Companies House and use Company ID 01396513.
Developments
Asda has five store formats: Supercentres, (averaging 85,000 square foot sales area); Superstores (averaging 46,500 square foot), Supermarkets (averaging 17,000 square foot) and Asda Living (averaging 28,000 square foot sales) and the new On the Move convenience store format.
The size of the estate rose substantially in 2010 through the £778 million acquisition of discount chain Netto. This acquisition saw 193 Netto stores taken over by Asda to boost the American-owned group’s portfolio of smaller stores.
In April 2013, Asda confirmed a five-year plan to build 40 major superstores, 100 supermarkets and 150 forecourt shops. Around two-thirds of these stores were expected to be in the southeast, particularly London, Cornwall and Devon but these plans were not fulfilled. In 2016, Asda opened four new superstores and four supermarkets, which added 161,000 sq ft of new space to the group’s estate. In 2017, the group opened one home shopping centre, and eight new stores, including three superstores and five supermarkets but during 2018, Asda opened just one grocery shopping home fulfilment centre and in 2019 the group refreshed 37 stores.
In October 2020, a consortium led by Lancashire-based brothers Zuber and Mohsin Issa and private equity firm TDR Capital took a majority stake in Asda in a deal that gave Asda an enterprise value of £6.8 billion. In 2021, Asda opened 31 On the Move convenience stores last year as part of a wider roll-out for the format across petrol stations owned by the Issa brothers’ EG Group.
Glenigan Data
In the 12 months to Q1 2023, Asda let 5 main contracts valued at £250,000 or more (2022: 24). The total value of these contracts was £2.5 million (2022: £52.0 million).
Conclusion: Construction shift under new owners
In the first full year of ownership under the Issa brothers and TDRAs, Asda sought to absorb cost price inflation and keep prices as low as possible for customers in a long-term bid to remain the UK’s second largest supermarket. The group is also investing £28m to increase hourly pay rates for 13,000 distribution colleagues by a minimum of 8%, and a consequence of this strategy appears to have been a reduction in capital expenditure.
Investment in construction as also disrupted ahead of a mooted merger with rival J Sainsbury, which foundered due to objections from the Competitions & Markets and grew only. The consequences of the subsequent acquisition of Asda by the Issa brothers’ EG Group, had produced an increase in capital spending and a handful of major projects but this appears to have dissipated amidst a change in corporate strategies.
After a 25% rise in the value of contract awards in the 12 months to Q1 2022, the 12 months to 2023 saw a massive drop off in spending. Investment in the On the Move convenience stores was set to increase to 200 stores by the end of 2022 but this target appears to have been missed. Last year did see the 100th Asda on the Move store opened in partnership with the Issa Brothers’ Euro Garages (EG) Group.
There appears to have been a shift in spend with EG Group bincreasing construction spend and taking on larger jobs, such as storage and distribution units. In the 12 months to Q1 2023, spending at EG Group has however increased by 1% to £46.8 million (2022: £40.6 million). The value of the average contract awarded at Asda slumped to £508,000 (2022: £2.2 million), but at EG Group this measure was larger at £1.7 million (2022: £1.7 million).
During 2022, two Asda Express stores opened in Sutton Coldfield and Tottenham Hale in Q4 and a further are scheduled 30 to follow in 2023, beginning with Calne in May (Project ID: 98443940) and Romford train station in June (Project ID: 23044894). The largest project comprises due to start on site is a £30 million programme of alterations to Asda’s Patchway site at Cribbs Causeway in Bristol (Project ID: 20077536). Other Asda stores in development include a £17.5 million superstore in Monkstown, Northern Ireland (Project ID: 13265731).
To accelerate its growth in the convenience market, Asda has also acquired 129 convenience stores and attached petrol stations from the Co-op for an enterprise value of £438 million and is looking to merge with EG Group, as the new owners look to counter the increasing growth of the discount grocers, notably Aldi and Lidl. In the near term, the cost of living crisis may continue to divert investment discounting towards product discounting.
Winning work with Asda
Glenigan’s data shows that main contractors that Asda has worked with recently range from larger players such as Glencar to smaller regional contractors, including Bradford-based HB Projects. The group also works with planning and design consultants including C&A Design, Pegasus and Whittam Cox.
Asda has a Retail Development team, which looks after capital expenditure including store builds, extensions and remodelling. Asda’s Construction & Building Services Procurement team sits within the Central Support team in Retail Development.
The company emphasises that it works in partnership with its supplier base. Suppliers are expected to understand the group’s strategic objectives, company culture and have a close working relationship with key trading contacts. A supplier engagement team conveys information between the company and its trading partners. Potential suppliers are asked to approach the company through an email address – asdasupplierengagement@asda.co.uk
Key Asda procurement contacts include:
Head of Supplier Management Cost Optimisation – Ross Greenley, tel: 0113-2435435