Stuart Rose fights to revive Asda, private equity fund BASKET CASE

When Mohsin Issa made a disastrous appearance before MPs investigating high petrol prices, it became 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 made it inevitable that he would eventually have to leave Britain’s third-biggest supermarket.

The only question was when.

It took another year for Mohsin to finally step down, to be replaced by Asda chairman and retail veteran Stuart Rose.

During that time, Asda’s market share continued to fall at an alarming rate amid complaints from shoppers about poor quality stores, grumpy staff and poor product availability.

Along with his brother Zuber and private equity group TDR Capital, Mohsin backed a £6.8bn takeover in 2022 that left Asda saddled with huge debts and a labyrinthine corporate structure with Jersey-based entities called “Phantom”.

The controversial deal came just as interest rates began to soar, increasing borrowing costs for the new owners amid a cost-of-living squeeze that benefited German discount chains Aldi and Lidl.

The brothers, who between them owned a 45 per cent stake in Asda, had made their money by building fuel retailer Eurogarages from scratch, which has since been renamed EG Group.

What they lacked was experience in running a food retailer like Asda, a chain of superstores, or a clothing business like their George unit.

An experienced management team was assembled to address this shortcoming, while Mohsin led (and was supposed to complete) a major IT overhaul. Unfortunately, this resulted in thousands of plant workers being incorrectly compensated. That project remains unfinished.

Under Mohsin, Asda expanded into convenience stores, a promising growth sector, and launched a successful loyalty card.

“He’s a really nice guy and has done a lot of great work within the company that should pay off in the long run,” said one source, before admitting that his departure was “the right decision.”

Some decisions, such as buying a supermarket in one of the most fashionable areas of south Manchester, bordered on the strange, given Asda’s budget-price credentials.

Meanwhile, Mohsin is now in a relationship with a senior accountant, Victoria Price.

He and Zuber have also denied reports of a rift between them.

Zuber subsequently sold his stake in Asda to TDR, which became the majority owner of the business. Lack of retail experience is not an accusation that can be levelled against Rose, the former chief executive of Marks & Spencer, although it remains to be seen how long the 75-year-old will want to run the store.

“He’s obviously a talented guy, but it’s been a long time since he’s had day-to-day responsibility for trading and performance,” said one retail expert.

Mohsin’s departure paves the way for a new chief executive to be hired on a permanent basis: Asda has been

carrying out ‘an extensive international search’ over three years.

An appointment is not believed to be imminent.

Whoever gets the job will face a formidable inbox.

“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 because of it. They need to do things differently.” The top priority is to stem Asda’s dramatic decline in market share in an increasingly benign trading environment as inflation falls and price pressure on consumers eases.

The latest figures from researchers NIQ show the supermarket was again by far the worst performer, with market share plummeting to 11.8 per cent in the 12 weeks to 7 September, from 13.1 per cent a year ago.

As Clive Black of stockbroking firm Shore Capital noted last week, supermarkets are looking in good shape, “except for Asda”.

Little wonder Rose said last month that he was “embarrassed” by Asda’s performance. Recent measures Asda has taken to halt the decline include more staff at its manned checkouts to reduce queues in a move aimed at reducing its reliance on self-service checkouts, which have failed to deliver the promised cost savings.

Mohsin remains a board member at Leeds-based Asda but will focus on running EG Group across the Pennines in his home town of Blackburn.

He retains a 22.5 percent stake in the grocer, though analysts say it’s only a matter of time before he follows in his brother’s footsteps and sells.

The most likely buyer, once again, is TDR, whose director, Rob Hattrell (a former Tesco executive), will help Rose run Asda’s day-to-day operations.

Private equity groups are known to “flip” their investments by selling them after a few years of taking their share. Unless Asda’s performance improves, TDR may have no choice but to hold on to the position in the hope that its fortunes will eventually recover.