Asda’s chairman Allan Leighton needs to resolve the chain’s operational challenges in the months ahead to prevent further downgrades to its credit rating, according to Moody’s.
The ratings agency has cautioned that Asda risks losing ground to Morrisons, which is seeing improvement under the leadership of chief executive Rami Baitiéh. Meanwhile, Asda has operated without a permanent chief executive since Roger Burnley’s departure in 2021, experiencing plummeting sales and diminishing market share.
While Morrisons maintains a B2 rating compared to Asda’s B1 – both considered speculative with high credit risk – Moody’s indicates Morrisons’ outlook is improving due to debt reduction below £4bn (down from £5.6bn after the Clayton Dubilier & Rice acquisition) and renewed operational momentum.
Although Asda received a ratings upgrade from B2 in April 2023, Moody’s warns that ongoing operational issues have since weakened its credit standing, with potential for further deterioration if revenue growth isn’t restored.
According to the most recent Kantar figures, Asda’s sales dipped by 5.2% during the 12 weeks to January 28, making it the only major supermarket to see a decline in this period.
“Asda faces significant operational challenges related to customer service, store experience and product availability, while simultaneously competing for market share in a highly competitive environment,” Moody’s noted.
Since replacing Lord Stuart Rose as chairman last year, Asda veteran Leighton has been working to revitalise the business, promising to “restore Asda’s DNA.”
His latest initiative includes a major price reduction campaign featuring Joe Wicks, with the goal of making Asda’s full product range more affordable than all other comprehensive supermarkets within two years.
No comments yet