Stuart Rose fights to revive Asda, private equity BASKET CASE
When Mohsin Issa made a disastrous appearance before MPs investigating high petrol prices, it was clear the petrol station magnate was living on borrowed time as boss of Asda.
His repetitive, robotic responses and failure to answer even the most basic questions from lawmakers left him out of the UK’s third-largest supermarket.
The only question was when.
It took another year before Mohsin finally stepped down and was replaced by Stuart Rose, chairman of Asda and a retail veteran.
During that time, Asda’s market share has continued to decline at an alarming rate, amid customer complaints about shoddy stores, grumpy staff and poor product availability.
Exit route: Mohsin Issa must finally step down – he will be replaced by Asda chairman and retail veteran Stuart Rose
Along with his brother Zuber and private equity group TDR Capital, Mohsin backed a £6.8bn takeover in 2022, leaving Asda with huge debts and a labyrinthine corporate structure with Jersey-based entities dubbed ‘Phantom’.
The controversial deal came as interest rates began to rise, pushing up borrowing costs for the new owners while the cost of living fell, playing into the hands of German discounters Aldi and Lidl.
The brothers, who together owned a 45 percent stake in Asda, made their money from founding fuel retailer Eurogarages, which has now been renamed EG Group.
What they lacked was experience of running a supermarket chain like Asda, a chain of supermarkets or a clothing company like the George division.
An experienced management team was assembled to fill this gap, while Mohsin led and was expected to complete a major IT overhaul. Unfortunately, thousands of employees on the shop floor were paid the wrong amount as a result. That project is still not finished.
Under Mohsin, Asda expanded its operations into convenience stores, a promising growth area, and introduced a successful loyalty card.
“He’s a really nice guy and has done a lot of good work within the industry, which will pay off in the long run,” said an insider, who went on to admit his departure was “the right move.”
Some decisions – such as buying a supermarket in one of the most upmarket areas of south Manchester – bordered on the bizarre, given Asda’s reputation for offering low prices.
Meanwhile, Mohsin is in a relationship with a successful accountant, Victoria Price.
He and Zuber also deny reports of a rift between them.
Zuber later sold his stake in Asda to TDR, who became the majority shareholder of the business. Lack of retail experience is not an accusation that can be levelled against Rose, the former CEO of Marks & Spencer, although it remains to be seen how long the 75-year-old will want to run the store.
“He’s clearly a talented guy, but it’s been a very long time since he’s had day-to-day responsibility for the business and performance,” said one retail expert.
Mohsin’s departure clears the way for a new CEO to be appointed on a permanent basis – Asda is
to conduct an ‘extensive international search’ for three years.
An appointment is not expected anytime soon.
Tough fight: Stuart Rose
Whoever gets the job will be met with a formidable reception.
‘There is clearly a lot of uncertainty around ownership, leadership, direction and performance. It’s a pretty toxic set of fundamental issues,’ the retail expert added. ‘It’s clear that Asda has suffered as a result. They need to do things differently.’ The top priority is to reverse Asda’s dramatic decline in market share in an increasingly favourable trading environment, as inflation falls and price pressure on shoppers eases.
The latest figures from research agency NIQ show that the supermarket once again performed by far the worst. Its market share fell to 11.8 percent in the twelve weeks to September 7, compared to 13.1 percent a year ago.
As Clive Black of stockbroker Shore Capital noted last week, supermarkets are looking pretty good, except for Asda.
It’s no wonder Rose said last month he was “embarrassed” by Asda’s performance. Recent measures Asda has taken to stem the tide include adding more staff to manned checkouts to reduce queues in a bid to reduce reliance on self-checkouts, which have failed to deliver the promised cost savings.
Mohsin will remain on the board of Leeds-based Asda, but will focus on running EG Group in the Pennines, in his hometown of Blackburn.
He will retain a 22.5 percent stake in the grocery store, but analysts say it is only a matter of time before he follows in his brother’s footsteps and sells his business.
The most likely buyer is – again – TDR, whose managing director Rob Hattrell – a former Tesco executive – will help Rose run Asda’s day-to-day operations.
Private equity groups have a reputation for ‘flipping’ their investments by selling them on a few years after they’ve collected their pound of flesh. Unless Asda’s performance improves, TDR may have no choice but to hold on in the hope that its fortunes will eventually turn around.
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