Asda- Fight for Survival - Sales Dropping and Debt Interest Higher than Profits
In the News
Another supermarket in crisis it seems. The supermarket chain was acquired in a leveraged buyout so the debt of buying the company was added to the debts of the supermarket itself and now its struggling because of these crippling debts and interest payments on these debts. A large fall in sales is destroying confidence in the supermarket and creditors may start panicking and not supply stock to the retailer because they may fear not being paid for those products. Of course before this leveraged buyout Asda were relatively free of debts as part of the walmart corporation but now the company is saddled with huge debts. Maybe a year from now Asda are gone or maybe it will have new owners. Currently Asda is not profitable enough to even pay the interest on its debts so its debt is increasing. It's difficult to see how they can make enough profit to just pay the interest on their debts. Will the bank or banks continue to finance the company with debts growing year by year. Maybe they will force administration. At some point someone has to decide whether it can be saved. Maybe the banks will write off some debt to allow the supermarket to return to actual profit or maybe a debt for equity swap where banks take ownership of part of the business.
The reality was/is that Asda is a pretty solid business and very profitable but then billions of debt was added to the company and now its on life support. I'm personally disgusted that such debt can be added to a company like this. It is completely unfair to the staff. They have worked hard to build the business up and then through financial manipulation the business is pretty much destroyed. Call me mad but I just think if you are buying a company and becoming responsible for 10s of thousands of people's livelihoods then perhaps you should actually have the money to buy the company rather than just buy it on the pretence that you will manage it so well that the business will still do well with billions of debt. I would personally ban leveraged buyouts.
Now that you post this it makes more sense, i’ve been in to a few Asda’s and some of their shelves were lacking a lot of stock.
I don’t know how they keep allowing these type of deals to happen.
The mistake with Asda was selling it to the two brothers that owned euro garages,I believe they borrowed to buy it, offers instore disappeared and prices went up and as such customers moved elsewhere , even their petrol prices increased. Morrisons is another supermarket experiencing problems and trying to claw money back by selling off it's fuel stations and increasing prices instore , customers are not silly thou and increased prices equals less overall sales.
I watched a video regarding asda being in a bit of trouble and at first was surprised but then am i? I couldnt tell you the last time I shopped there and its bottom of the list for supermarkets in my personal opinion. Sad for the workers though, I hope they can resolve the situation for them.
HannahSunderlan I haven’t shopped at asda in years. I find that the fruit and veg in my local always looks a bit poor - even if it has 4 days on it. Always put me off shopping there
The unions are to be blamed for demanding pay increases, operating self-service tills, nonstop advertising of branded goods only 10p-50p cheaper than their rivals, unnecessary security barriers I could go on.
But Asda is still my favourite supermarket ahead of Tesco to go to.
They all slated Walmart, but since the takeover In 2021 - It has gone from good to really bad. Walmart still has a share In It, so does those Issa Brothers & so does TDR. The fuel was the highest compared to the rest so no surprise there. The brothers just borrow from Peter & give to Paul. It would not surprise me that some of their stores will eventually become Warehouses In time.
Emerge11 I think when you have billions of debt to pay you try to increase your margin in many places but for many consumers it doesn't go un-noticed. When they started their value range with yellow packaging the initial prices were great but I remember the granola going from £1 to £1.20 to something like £1.50 in just a matter of weeks. Maybe Walmart will buy it back heavily discounted if it goes to administration? That would be a canny deal for them. I'm not sure how much Walmart still own but I think it is a minority interest.
That’s a shame, I hope they recover. Lidl and Aldi seem be dominating the market these days.
Pjran Which adds to the UK's debt with a higher number of imported goods (despite often showing Union Jacks everywhere in their advertising) and of course with profits going back to Germany. That said Lidl UK is heavily in debt but Aldi are doing very well.
I love Asda clothing, it is great but I only buy clothes from there in the sales and haven't bought food from them in a long time. I don't think their loyalty scheme is any good either.
If they bring in a good loyalty scheme they might have a chance but a scheme like the nectar card of 10/1
5 years.
SilverSurfer I sort of wonder about these loyalty schemes. Aldi seems to be the most profitable supermarket and they run a very simple setup with no loyalty scheme at all. They just have low prices. I'm not a great fan of Aldi's limited choices and quality but its a simple setup that is more efficient.
BonzoBanana when nectar had there decent loyalty scheme going, not like the garbage they have now, I would only use Sainsbury’s and any garage linked to nectar. You could save up and cover your whole Christmas shop. Most people are loyal to prices and I think a really good loyalty programme would bring the customers back, but the programme has to be realistic not like the current one.
SilverSurfer I had trouble with their new app as I couldn't pass the security check as it kept sending the security code to my old phone number even though I'd changed the phone number on my account to the new phone number. It took a while to sort out but because I couldn't use the app I didn't bother to shop in Asda and went elsewhere. The app doesn't seem intuitive either.
That's a shame, we don't have an Asda close by but usually visit around Xmas time to just do a different shop. We used to like visiting their cafe but that had gone when we last went and there was a couple of foodie outlets there which wasn;t so good.
We had to stop buying from Asda, it had gotten so expensive, empty shelves, I know quite a few that longer shop there.
That’s the trouble with buyouts it’s normal to borrow to purchase and that in itself is not bad, it’s when assets are sold off and then they borrow which is worse but by the sounds of this they shouldn’t have been allowed to borrow the money to buy it, if level of debt was that high before, the banks need investing here. When they buy out they never care about staff history has shown that look at Cadburys to name but one. Its executives pay and shareholders dividends that matter to them.
It’s like the water companies huge bonuses and dividends paid by deep in debt - taxpayers going to bail one of them out apparently
I really like Asda, my store is massive so I guess that helps. Their clothing has always been good. I use their pharmacy as it opens in the evening so I can collect prescriptions after work. The pharmacy is run on a stretched staff and under pressure because Lloyd’s moved out of the Sainsbury’s so they are the only convenient one for people.
The loyalty app, I think is a good thing but I don’t think they actually needed it, they hadn’t for years before and it all costs money and that money could have been used on prices although prices everywhere have gone up, not just Asda. I feel it’s got very cartel like, if you’re matching there’s not a lot of choice on some products
I’m against self-scan due to the putting people out of jobs and also again the technology costs a lot of money for not a lot of gain.
There’s also theft which has increased.
I got told by the nice lady on the till of the 2 they had open, that my store loses £800K in theft per year. That very day, a couple of people had just walked through the self-scan pay section with a trolley full.
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