Asda is selling 24 stores and a distribution centre in a sale-and-leaseback deal worth £568 million, a move analysts have described as a 'sign of weakness' as the supermarket chain continues to lose market share. The Leeds-based retailer, burdened by debt from its 2020 takeover, has seen sales fall 3.9% in the three months to November, with market share dropping by one percentage point year-on-year, according to data from Worldpanel by Numerator.
The properties have been sold to DTZ Investors and Blue Owl Capital, but Asda will continue to operate from them under lease agreements. Proceeds from the deal are reportedly intended to repay a debt to Walmart, the US retailer that retains a 10% stake in Asda, rather than for investment or reducing the group's main debts, according to the Financial Times. This has led to a fall in Asda's bonds.
Clive Black, a retail analyst at Shore Capital, said the sale 'looks like a sign of weakness' and noted that while it could help pay off debt or free up capital, higher rents would reduce cash for day-to-day operations. 'If trading was hunky dory, that can be accommodated, but that is not the case,' he added. GMB union national officer Nadine Houghton expressed concerns about Asda's future, stating: 'Asda's owners, TDR Capital, is selling off yet more assets to settle the debt liabilities heaped on the business by its own borrowing.'
Asda's parent group slumped to a near-£600 million loss last year, and the company has been trying to win back customers with price cuts under new chair Allan Leighton. However, Patrick O'Brien of GlobalData said the promised aggressiveness on pricing has not materialised. Asda previously sold most of its warehouses for £1.7 billion in 2021 and 25 supermarkets for £650 million in 2023 in similar leaseback deals.
An Asda spokesperson defended the strategy, saying: 'Asda's property strategy is centred on maintaining a strong freehold base while also taking a considered and selective approach to unlocking value from our estate where appropriate.' The company operates 579 supermarkets, 517 Express stores, and 29 Asda Living outlets across the UK.
