UK's Asda warns of sales hit from completion of Walmart IT separation

By James Davey

LONDON (Reuters) -Asda, Britain’s third-largest supermarket group, said on Thursday that sales in its current quarter would be dented by disruption linked to the final phase of a major IT overhaul separating its systems from former owner Walmart.

Walmart sold Asda to Zuber and Mohsin Issa and private equity firm TDR Capital in 2021. Since then, Asda has been separating more than 2,500 systems from Walmart, which retains a 10% stake in Asda.

The project completed this week, with all stores, food depots and office systems operating on Asda-owned technology.

"The collective rate of completion did cause some temporary disruption with product availability and in our online experience, which will impact our sales outturn in the current (third) quarter," Asda executive chairman Allan Leighton said.

He told reporters the programme was the biggest IT systems change "certainly in Europe, maybe ever".

"This is no mean feat. Building a completely new set of systems whilst trying to run on the other systems - it's open-heart surgery while the patient's still alive."

Asda's second quarter to June 30 sales fell 0.2%, an improvement on the previous quarter's 3.1% drop, driven by price cuts and an increase in product availability to 96% - its best in eight years.

TDR, now Asda's majority owner, brought Leighton back to the grocer in November, more than two decades after he served as CEO.

In March, Leighton warned his plan to be 5% to 10% cheaper than rivals would "materially reduce" profit.

His comments hit the shares of industry leader Tesco and number two Sainsbury's on fears of a price war. However, no price war has materialised and their stock prices have since rebounded, with both posting strong results.

Leighton forecast Asda would exit the year in like-for-like sales growth.

Industry data published last week showed Asda's sales fell 2.6% over the 12 weeks to August 10 year-on-year, with its market share down 0.9 percentage points to 11.8%.

Asda is in danger of being overtaken by discounter Aldi, which was only 1 percentage point behind with a market share of 10.8%.

(Reporting by James DaveyEditing by Mark Potter)