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Why Walmart is willing to check out of Asda

It's instructive to look back on the promises that were made when, on 14 June 1999, Asda announced it had agreed to a ?6.716bn takeover by Walmart.
The American behemoth, at that point yet to experience any serious setbacks internationally, said the deal would "provide Asda with access to additional capital for expanding its store portfolio and developing its business".At the time, Asda was the UK's third largest supermarket chain, with annual sales of more than €8bn from 229 stores and employing more than 78,000 full and part-time staff.And today? Asda has annual sales of €22.2bn from 584 stores and employs more than 146,000 staff.So, on paper, it's a substantially bigger business.But it's still - despite having briefly grabbed the number two spot - only the UK's third-largest supermarket chain.And the price at which it is being valued in its takeover by Sainsbury? €7.3bn.
Why Walmart is willing to check out of Asda

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Sainsbury's CFO: 'No plans to close any stores'
That's right. A mere €584m more than Walmart paid for it 19 years ago.Yes, Asda's profitability has grown during its near-two decades in Walmart's tender embrace.Its operating profits in the year to 1 May 1999 were €436m. In 2017, its operating profits were €720m.That doesn't seem like much of an improvement given that Asda's store estate has more than doubled in size and its employee base came close to doubling.The figures betray the awkward truth for what was billed as one of the world's best-run companies when it stormed into Britain: its acquisition of Asda has been hugely disappointing.That, in turn, explains why Walmart has been so happy to offload Asda to Sainsbury's.The expectation, when Walmart snatched Asda from under the nose of Kingfisher - now best known for its ownership of B&Q but then also owner of Comet, Superdrug and Woolworths (RIP) - was that it would sweep all before it.
Why Walmart is willing to check out of Asda

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US retail giant Walmart bought Asda in 1999
Walmart's buying power, as the world's biggest retailer, would ensure Asda remained the cheapest of the major grocery multiples.Even IBM, then one of the mightiest IT companies on the planet, was said to quake in the face of Walmart's ability to beat it up on the price of till technology.Everyone was seen as vulnerable to the extra teeth Walmart would bring Asda - chiefly Safeway, then the fourth-largest supermarket chain, but also some of the general retailers, including Kingfisher, but also the likes of Boots and Dixons.An early statement of Walmart's intent came when, a year after buying Asda, the first new Asda Walmart superstore opened at Patchway, north Bristol.Asda trumpeted how it would sell everything from Ray-ban sunglasses to widescreen televisions at up to 60% less than the high street.
Tony Blair, who in opposition had coined the phrase 'rip-off Britain', was thrilled at the PR opportunities and welcomed the opening wholeheartedly.Only a few seasoned retail-watchers dared to point out that the store was actually a quarter of a century old and had originally been built by the French retail giant Carrefour as part of an ill-fated expansion into Britain in the 1970s.
Why Walmart is willing to check out of Asda

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Sainsbury's chief executive Mike Coupe (l) announced the deal with Walmart International boss Judith McKenna and Asda's Roger Burnley
A few months later, amid wild rumours of a bust-up with his bosses in Bentonville, Arkansas, Allan Leighton, chief executive of Asda at the time of the takeover, resigned to "go plural".Archie Norman, the former chairman, had already left - and the superstar team that had taken Asda from a basket-case to one of the UK's most-admired retailers was gone.Following them out of the door was a galaxy of talent that included fashion genius George Davies, the founder of Next, who Messrs Norman and Leighton had lured to Asda to launch the celebrated 'George at Asda' clothing range.Tesco, by now led by Terry Leahy, fought back against Asda with a ferocity its new American owners could not have expected.Even Safeway, under a former Walmart executive, Carlos Criado-Perez, raised its game before being bought by Morrisons - a deal Asda had sought for itself but in which it was thwarted by the competition authorities.Asda's share of the grocery market remained static and it was not until August 2003 that it finally overtook Sainsbury's to become the UK's second-largest grocer.A year later, the latter appointed Justin King - a protege of Messrs Norman and Leighton - chief executive, paving the way for a revival that eventually saw Sainsbury's claw back the number two spot.By now, Walmart had other issues.
Why Walmart is willing to check out of Asda

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Walmart opened a 'supercentre' in Bristol in 2000
In 2006, it quit German, having failed to crack the market and walking away with a $1bn loss for its pains.Ironically, it is two German retailers, Aldi and Lidl, that have nipped away at Asda's UK market share in recent years.Rumours have persisted over the years about the ability of a succession of Asda chief executives to run the business as they wanted.Excluding Mr Leighton, it is now onto its sixth chief executive under Walmart's ownership, compared with just three apiece at Tesco and Sainsbury's during the same period.Walmart's insistence on retaining a certain level of profitability from the business has handicapped successive Asda CEOs in recent years as they struggled to take on not only the Germans but a revived Tesco and Morrisons and an increasingly confident Sainsbury's which, under the leadership of Mike Coupe, has beefed up its non-food arm with the successful acquisition of Argos.More recently, Walmart has found itself increasingly pre-occupied with competition from Amazon, a rival which, some say, poses an existential threat to it.
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Its little local difficulties in the UK were way down the list of priorities for the Walmart board.It was a willing seller of Asda and Mr Coupe's approach to it has been astutely timed.
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