Asda pledges to slash debts as profits soar beyond £1bn
Sales at Asda have leapt by nearly a quarter to more than £1bn, largely due to its burgeoning convenience store expansion.
The nation’s third-biggest supermarket reported a 24 per cent jump in annual earnings, saying it was making strategic progress despite losing market share to rivals.
Owned by brothers Zuber and Mohsin Issa and private equity firm TDR Capital, the supermarket chain said its 2023 adjusted profits after rent – its preferred profit measure – hit £1.08bn.
This was based on total sales, excluding fuel, of £21.9bn – a rise of 7.1 per cent.
Asda has, however, been burdened by high debt levels since the Issas and TDR bought the business from Walmart in a £6.8bn deal in 2020, which left the US giant retaining a 10 per cent stake.
Asda said its net debt at the end of 2023 was reduced to £3.8bn and it was “fully committed to further deleveraging”.
Chief financial officer Michael Gleeson said finance costs in 2023 rose to £225m, from £185m in 2022.
While like-for-like sales rose 5.4 per cent, growth slowed in the fourth quarter to 2.2 per cent. Furthermore, monthly industry data has consistently shown Asda underperforming its bigger rivals – market leader Tesco and second-placed Sainsbury’s.
Data from market researcher Kantar last month showed Asda had a 13.8 per cent share of Britain’s grocery market.
That was down 50 basis points on the year, and comes as Tesco extends its lead and discounters Aldi and Lidl continue to grow market share.
Still, Mohsin Issa said Asda had “rock-solid foundations,” and had invested in price and quality of its products in 2023, while progress included taking full control of 116 convenience stores from the Co-op and buying 356 sites of EG Group’s UK business.
Asda’s strategy is to boost its convenience store presence by rolling out Asda Express stores across these sites.
EG Group is also owned by the Issa brothers and TDR. “Tesco and Sainsbury’s were able to insulate themselves quite a bit over the last 15 years as they grew their convenience business,” Mr Gleeson said. “We think we have an opportunity which we’ve made a significant start on.”
Asda declined to comment on media reports that Zuber Issa was looking to offload his 22.5 per cent stake.