Walmart has confirmed that it is considering a stock market listing for its Asda subsidiary after plans to merge the business with Sainsbury’s failed. However, such a move could be some way off with the group saying it would maintain its current strategy and “accelerate” its price position.
Speaking to 1,200 Asda managers at a company event in Leeds yesterday, Judith McKenna, President and CEO of Walmart’s international division, said: “Walmart does not have a one size fits all approach to operating its international markets, but a consistent focus on strong local businesses powered by Walmart.”
However, she confirmed that “While we are not rushing into anything, I want you to know that we are seriously considering a path to an IPO – a public listing – to strengthen your long term success.”
She added that any preparations for a stock market listing would “take years” and that staff’s primary focus should remain on delivering its strategy to “make you the best Asda you can be”.
McKenna stressed: “Walmart will ensure that you have resources to do that”.
It is the first time the US retail giant has publicly acknowledged the speculation about Asda’s future, following the CMA’s decision to block its deal with Sainsbury’s.
Since it became clear that the competition watchdog was likely to block the merger, analysts have speculated that Walmart may look for a full or partial sale of Asda to a private equity firm as it switches its focus to faster growing emerging markets such as India. However, with grocery margins historically proving too low for private equity buyers, a flotation could be the more likely outcome for Asda. The company was listed on the stock market before Walmart acquired it 20 years ago.
Asda has recovered some sales momentum in the last couple of years after cutting prices and improving its own label ranges. It is due to reveal first-quarter trading figures tomorrow.
At the same meeting yesterday, Asda’s Chief Executive Roger Burnley stated that there would be no major change in direction for the business with it focused on its strategy of “winning on price, delivering consistent customer experience and driving growth where customers care.”
Having delivered seven successive quarters of growth, he said the supermarket’s current strategy is working. However, Burnley cautioned that market trends are accelerating faster than expected and that it would be harder to deliver the strategy at the same pace without the synergies that the merger with Sainsbury’s could have provided.
He told attendees to “forget the language of Plan A and Plan B – there has always been one clear strategy for Asda … it requires momentum in the short term, growth in the medium term and sustainability in the long term … we need to prioritise and focus on what will make a difference to customers versus what won’t.”
Burnley added that the chain would “accelerate our price position”, as well as continue to invest in technology to ensure it provides a “consistent and trusted customer experience, and grow where customers care.”
It plans to invest £80m in price cuts during the rest of 2019, whilst spending on initiatives and trials of new technology to help accelerate moves to provide a “hassle free” shopping experience for its customers. This includes services such same-day delivery of groceries, equipping more stores with scan and go technology, and the roll-out of its click & collect towers.
Closing the conference, Burnley said: “We have a mountain to climb – continuing momentum, into growth, and ultimately, sustainability – but we can make a difference. We can be brilliant for our customers today. And we can be brilliant for our customers in the future.”
NAM Implications:
- Inevitable, and ties in with similar move in Brazil.
- Probably part of a Walmart strategy to leave non-US markets and yet retain some participation, say 20-40%?
- Worthwhile NAMs keeping in mind Walmart requirements in future dealings: momentum in the short term, growth in the medium term and sustainability in the long term.
