Asda’s co-owner Mohsin Issa was adamant in December that recruiting a chief executive to run the UK’s third-largest supermarket was not “difficult” — despite having spent 18 months looking for one.
Until a permanent candidate could be found, he was the “best qualified” for the top job, he told MPs during a hearing about the involvement of private equity in the retail sector, as the chain sought to disentangle its IT systems from those of former owner Walmart. Issa, alongside brother Zuber and private equity group TDR Capital, had bought Asda in a £6.8bn leveraged buyout in 2020.
Nine months on, Asda said on Wednesday that Mohsin Issa would step back from running the supermarket, with Lord Stuart Rose, Asda’s chair, and Rob Hattrell, an executive at TDR, its majority owner, taking over day-to-day responsibility for leading the chain, as the search for a permanent chief executive heads past the two-year mark.
The chain is grappling with high debt and shrinking sales. Asda’s market share has fallen from 14.8 per cent when the takeover completed in February 2021 to 12.6 per cent in August, according to data from Kantar.
Meanwhile German discounters Aldi and Lidl have gained ground, as has Tesco. Net debt at the end of June was £3.9bn although the business “remains fully committed to further deleveraging”, Asda said, having refinanced more than £3.2bn of debt in May.
“Asda just seems to be lagging well behind the curve in terms of the competition, the proposition, the way that they [owners] evolved the business, the needs of their consumers, and that’s playing through in market share,” said Richard Lim, chief executive of Retail Economics.
Issa, who will remain a non-executive director at Leeds-based Asda, will instead focus on running EG Group, the petrol station business he founded with his brother Zuber in Blackburn in 2001, as the latter steps back from both businesses.
In June, Zuber Issa agreed to sell his holding in Asda to TDR Capital, giving the buyout firm a 67.5 per cent stake, and on October 31, he is expected to step down from being co-chief executive at EG Group, becoming a non-executive director. He will separately lead a fledgling UK petrol forecourt and convenience retail business, carved out of some EG assets.
Earlier this year, Mohsin Issa dismissed speculation about a rift with his brother, saying in a BBC interview that they got on “exceptionally well”, although the pair have since sought to neaten the division of assets between them.
There has been intense public and political scrutiny of the brothers since their acquisition of Asda. In February, Mohsin Issa confirmed he was in a relationship with Victoria Price, a former tax partner who left EY shortly after the Big Four firm resigned as Asda’s auditor.
On Wednesday, he said: “We embarked on this exciting enterprise journey together knowing no boundaries, moving from one site in Bury to the world class global convenience business that it is today. I look forward to continuing to work with my brother and receiving his strategic counsel as a fellow shareholder.”
His exit from Asda will be the latest change at the top amid a series of departures under its new owners. “There have been so many changes in the leadership and senior management team of Asda over the past few years, and it seems that they’ve really struggled to recruit the right talent and they’ve lost a lot of people who have been in the business for many years, and who left with a lot of knowledge,” said Retail Economics’ Lim.
Asda has highlighted a string of hires from other rivals such as Matt Heslop, currently chief operating officer at Lidl who will join shortly, finance chief Michael Gleeson, who previously worked at Morrisons in similar roles, and chief commercial officer for food Kris Comerford, who joined from Tesco in 2022.
One headhunter with knowledge of the chief executive hunt process said several candidates had so far been put off by a perceived lack of autonomy, with Mohsin Issa still involved in the business. Asda declined to comment.
Under Mohsin Issa, the grocery chain, known for its “big box” stores, has sought to expand into the convenience store format largely through acquisitions, going from 623 to 1,200 outlets and food-to-go sites as well as standalone Asda Express convenience stores.
It has been injecting fresh funds into making sure products are available, making stores cleaner and hiring more checkout staff after Rose admitted it had neglected customers and focused too much on the £800mn IT project. It has also launched a loyalty scheme from scratch which the company says now has more than 6mn active customers.
Rose said last month that he was “embarrassed” by Asda’s decline under his watch, and that Issa should step back from day-to-day operations. The chain needed “a different animal’, he told the Daily Telegraph newspaper.
Judith McKenna, former Walmart International chief who oversaw the sale of the chain in 2020, said Asda was “clearly not where it needs to be”, citing “distraction” as a possible reason for that. “Through circumstances, economy, distraction, whatever that has been, it is clearly not where it needs to be,” she said at the FT’s Future of Retail summit in London on Tuesday.
Earlier this month Giles Hurley, the boss of Aldi’s UK operations, said it “hasn’t even crossed our minds” that it could be on course to overtake Asda as the country’s third-largest chain, having leapfrogged Morrisons in September 2022, but he admitted that “of course, market share is interesting and of course we look at it as a business”.
Asda must complete the IT overhaul by the end of the year or it risks facing fees from Walmart, which retains a 10 per cent stake.
“I am the first to never [say from the] sideline what you should do or you shouldn’t do but I hope they get very quickly to the end of this [IT] transformation,” said McKenna, who retired last year. She had previously been both chief operating officer and chief financial officer at Asda before moving to Walmart. “It is way harder to get out of systems than it is to get into them.”
She added: “It is a good business and [it has] great colleagues . . . Ultimately I wish them well. But does it [Asda’s travails] hurt my heart a little? Yes, it does.”
Additional reporting Emily Herbert in London
