The situation facing Britain’s private equity-owned supermarkets is becoming increasingly challenging. Morrisons is experiencing a significant loss of senior management, with seven directors, including convenience director Miles Foster, property director Mark Nowak, and productivity director Jonathan Bell, departing over the summer. Since CEO Rami Baitiéh took over last November, nearly a third of the top 60 employees have resigned. Morrisons, which was acquired by US private equity firm Clayton, Dubilier & Rice (CD&R) in a £7 billion leveraged buyout in 2022, is burdened with £4 billion in debt and has lost 23% of its customer base over the past three years. Baitiéh aims to regain market share by enhancing product availability and improving customer complaint management. However, sales increased by only 1.4% in the 12 weeks leading to August 4, which is below the market growth rate.
Similarly, Asda, which was purchased by the Issa brothers and TDR Capital for £6.8 billion in 2021, is also facing difficulties. The company is reducing the pace of its convenience store openings and cutting its capital expenditure by £100 million to address issues on the shop floor. After initially planning to open 300 convenience stores by the end of 2026, Asda has only opened nine and has scaled back its target for this year from 30 to 12. The reduction in capital expenditure is being redirected towards improving product availability, enhancing store cleanliness, and reducing checkout wait times. Poor store conditions, exacerbated by disruptive IT changes, have contributed to a 6% drop in sales over the past 12 weeks. Chairman Lord (Stuart) Rose has expressed embarrassment regarding Asda’s performance and suggested that co-owner Mohsin Issa should step back from operational roles. Former Morrisons CEO David Potts is considered a strong candidate to take over at Asda once his non-compete agreement expires in November. As both Morrisons and Asda face these challenges, their private equity owners are under pressure to restore the supermarkets to success.
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