Walmart shareholders gathered in the world’s largest retailer’s home in Bentonville, Arkansas last week for the annual meeting. Alex Lawson reports on developments there and at UK subsidiary Asda.

Asda boss Andy Clarke

Asda boss Andy Clarke

It’s 6am. Asda boss Andy Clarke is beaming as more than 200 Asda staff do the ‘Poznan´’ dance - a celebration from Polish football which involves interlinking arms and jumping with your back to the action - to Gloria Gaynor’s I Will Survive. Elsewhere in the Bud Walton Arena, Fayetteville, Walmart shareholders, staff from other nations and the world’s largest retailer’s founding Walton family file in.

It’s apt that the Leeds grocer’s staff are in a buoyant mood. Not only are they attending the most showbiz AGM in retail, but the grocer is in fine form. Asda reported growth in gross profits in the fourth quarter earlier this year and shrugged off the horse meat scandal to report 1.3% first-quarter like-for-like growth last month.

Moreover, Asda is proving the engine room of a motoring Walmart international division, which increased sales 7.4% to $135bn (£86.81bn) last year and now accounts for almost 30% of Walmart’s revenues.

For Clarke the annual event is a highlight in the calendar, not least because he thrives on spending time among
colleagues. That is evidenced when former Swindon store staff member and X Factor finalist Jahmene Douglas joins him for a drink, discussing his imminent debut album and scheduled tour of Asda stores to sign records.

Andy Clarke with X Factor finalist Jahmene Douglas and Asda chief marketing officer Stephen Smith

Andy Clarke with X Factor finalist Jahmene Douglas and Asda chief marketing officer Stephen Smith

“I’m loving what I’m doing,” says Clarke. Speaking exclusively to Retail Week the day before the AGM, he appears in high spirits in a hotel a stone’s throw from Walmart’s headquarters as he marks three years in the top Asda job.

The day before he swapped his usual business-like garb for a pink suit when he dressed as groovy film character Austin Powers to address Walmart’s international contingent. But has being the boss changed him? “When you have accountability for the whole company it changes how you view the business and how you change your team,” he explains. “Fundamentally, I’m the same person, I’m a shopkeeper at heart. Spending time with people is something I love doing. That’s the same, but the fact I’m running the business is a proud achievement.”

Making a mark

Lincolnshire-lad Clarke joined Asda in 1992 as a store manager in Edinburgh before taking on director positions in frozen food, bakery and produce. After stints at fashion retailer Matalan and frozen food specialist Iceland, Clarke returned to Asda in 2005 as retail director, becoming chief operating officer two years later. He recounts his interview for the top job as he sought to succeed Andy Bond: “I flew out to Mexico City to meet [Walmart chief executive] Mike Duke - the chief executive could be anywhere at any point. He said he knew before he met me I was hired, but still made me sweat some tough questions.”

Three years on and Clarke has already put his stamp on the retailer. His £778m acquisition of 193 Netto stores brought Asda shoppers greater convenience, the grocer’s astute approach to multichannel has delivered digital growth and he has switched around his top team to mark a new era.

Earlier this year, Clarke hired consultant McKinsey to examine Asda’s position and strategy for future growth in a rapidly changing market. “The change in formats and channels is something that’s really accelerated faster even than we had predicted in the last three years,” he says. “The acquisition of Netto and the growth of click-and-collect has shown how the future of retail is changing.”

Clarke says he has so far received “positive confirmation” of his existing strategy from McKinsey halfway through the process. He adds: “The leverage of our parent Walmart is something I’m passionate about and is key.

I have been aggressive in building even stronger relations with Walmart and sharing Asda experience.”

He explains that his goal since taking the reins has been to build stronger links with Bentonville and its businesses around the globe. “Three years ago I took a very different direction than had been taken before. I felt it was a moment for us to embrace differently our relationship.

“In the last three years more than the previous seven years [since rejoining], the way in which Asda is working with Walmart on a collaborative basis has moved forward to product, process and merchandising.”

Greater buying benefits are now being explored and this has extended to the purchase of Normanton-based supplier International Procurement & Logistics in 2009, which is now sourcing and supplying increasing volumes of products for all Walmart’s markets.

Confidence dented

If significant progress is being made at a strategic level, the here and now remains equally thought provoking.

The Asda Income Tracker shows customers’ purse strings remain tightly knotted while youth unemployment, which Clarke is on a mission to reduce, remains high. He observes that a clear North/South divide is evident in England and that Asda has the edge in offering cash-strapped northern shoppers the same prices in store and online, as opposed to competitors whose products are up to 25% more expensive in their convenience stores.

The year’s defining moment in grocery came in January when horse meat was discovered in a variety of beef products. Asda was among the worst affected - 12 beef lines were found to contain horse, pork or lamb.

“The industry and consumer confidence was dented by what happened,” says Clarke. “We have completed a detailed review and have robust processes in place to test and validate products so consumers can be certain of a product’s integrity. You can never say it will never happen again if someone is determined to do something illegal but we have plans in place.” He says that the retailer has yet to replace withdrawn private-label products with a new supplier’s burgers but products are in development.

Shape of things to come

Convenience has proved critical in grocery growth in 2013 and all the major players in the sector are building for growth. Asda retail director Mark Ibbotson questions the definition of the term. “It may not necessarily mean a 5,000 sq ft shop - selling online is a form of convenience and we are enjoying strong growth, particularly in mobile,” he says. Two small stores in Leeds and Sale are to pilot click-and-collect, not small-store grocery retail.

But if Asda has yet to truly show its hand in convenience, at the other end of the space scale it is facing the conundrum of how to counter the problem of excess space, particularly in its 25 enormous Supercentre stores.

“We will reinvent ourselves as we have done in the past,” says Ibbotson, who last week picked up The Sam Walton Entrepreneur award, Walmart’s highest accolade. “Consumers are moving online for non-food - for example with clothing where we have had great growth with George. Our plans are to become more design-orientated, our homewares will become more fashionable and displayed in a more accessible way to make effective use of the space.”

The grocer has also started to share space with other retailers, including B&Q, and is further rolling out Disney concessions, which have proved a fairy tale in enticing shoppers.

Clarke also expects more change around his top table in the coming years. In the past 18 months, marketing chief Rick Bendel, chief operating officer Judith McKenna and finance director Rob McWilliam have moved to Walmart or, in the latter’s case, Amazon.

They have been replaced by chief marketing officer Stephen Smith, who has led Asda’s Price Lock low-price
initiative, and chief financial officer Richard Mayfield, among others.

Clarke says he is happy for Asda to remain a breeding ground for talent.

“I have a relatively new board as we keep developing talent. I’m never going to stand in the way of those who want to take a bigger job internationally and the board will probably be different in three years’ time,” he says.

One thing Clarke is certain of is Asda’s trajectory. “We have had growth in sales, profit and market share. There are not many businesses that have had this shape of growth,” he points out.

At the AGM, Clarke sits among his staff as a cascade of stars including actors Hugh Jackman and Tom Cruise and musicians Kelly Clarkson, Jennifer Hudson and Asda’s own Jahmene grace the Walmart stage, confident that his business has star billing in Walmart’s international line-up.

Sharing Asda’s innovation

It is clear that Asda is being used as a hothouse for innovation by Walmart.

Walmart international boss Doug McMillon

Walmart international boss Doug McMillon

The grocer has developed a number of click-and-collect techniques being analysed internationally as well as the Asda Price Guarantee (APG) app, which has been well received. Taste testing that Asda used to form the basis of its Chosen By You range has been taken up by Walmart wholesale arm Sam’s Club, while Asda’s On Shelf Availability initiative has been rolled out to the US.

Walmart boss Mike Duke tells the AGM: “APG is delivering $500,000 (£321,522) of savings on the customers’ shopping at our main competitors in the UK.”

Walmart international chief executive Doug McMillon adds: “Walmart is becoming a truly global business planning toward commonality through innovation while allowing regions to be different.”

It’s not just one way traffic. Asda this month began trying out a new scan-and-go app developed in Walmart Labs.

Walmart: A company like no other

Amid the whooping and hollering of Walmart’s AGM, it would be easy to cringe at a business intent on pumping up its 2.2 million staff using chants and folksy imagery of its founder Sam Walton, held up as the embodiment of the American dream.

However, the retailer’s culture and chief executive Mike Duke’s strategy appear to be working. Last year sales were $466bn (£299.68bn) and profit rose to $28bn (£18bn), while its international division generated sales of $135bn (£86.82bn).

Mike Duke, Walmart

Mike Duke, Walmart

Walmart has also achieved three years of decline in the rate of cost growth, leveraging its scale to cut expense and deliver Everyday Low Prices to an increasing number of its newly acquired businesses.

However, performance in the last quarter was weak. Like-for-likes in its core US market slipped 1.4%, while international chief executive Doug McMillon acknowledged his division “did not do as good a job in Q2 as we ought to”. Entry into Africa last year, via Massmart, has given it a clear opportunity for growth.

However, the world’s largest retailer, which has 10,800 stores, remains embroiled in controversy. Still rocking from last year’s Mexican bribery scandal, Walmart faced protestors marching on Bentonville’s main square to protest over workers’ rights in Bangladesh following the death of 1,239 people in the collapse in April of the Rana Plaza building, which had previously supplied Walmart, and a fire at a supplier factory in November. Demands from shareholders to “end the empty promises” and effect genuine change in the country were voted against at the AGM.