The Walmart-owned grocer originally outlined its restructuring plans in May saying up to 2,600 people would lose their jobs, but after a 45-day consultation with staff, Asda said while it will create 5,670 new jobs, the majority of those will be lower level positions. The company expects to eliminate the 1,360 workers as some will not meet the selection criteria for the new roles, and others will choose to leave. The measure will affect 4,100 managers in total.
Asda chief executive Andy Clarke said, “As much as it is my job, and privilege, to be CEO of this business and to do what is right for Asda as a whole, this is one of the most difficult decisions I’ve had to make.” He added, “Whilst I genuinely believe that it is the right decision for the future of Asda, knowing that it will result in valued colleagues leaving us is not easy.”
UK grocers have come under pressure recently and some have lost market share to low cost leaders like Aldi and Lidl. As a result, several have restructuring plans underway.
Asda competitor Morrisons announced in June that it would cut 2,600 positions among store managers, and some say the move is a signal of similar shifts elsewhere. Household and personal care product retailer McBride also announced in June its intent to eliminate 400 positions from its 1,600 strong work force.
In terms of maintaining competitive pricing, Tesco announced in April that it would cut prices on basic food items in its stores and reduce online shipping charges. Morrisons said one week later that it would spend 1 billion pounds cutting costs over the next three years, upping the British supermarket price war.
According to a Market Forces blog on The Guardian, Shore Capital’s Clive Black and Darren Shirley said discounters are making strong in-roads into the UK market and regular price retailers are reacting.
“It is our central expectation that more jobs will go at the big supermarkets, with major initiatives expected to come with respect to head office headcount across the industry as well,” they noted, adding, “Whilst in no-way seeking to be a destabilising force elsewhere, we also believe that J Sainsbury (hold) and Tesco (sell), will also announce in due course material productivity programmes involving labour shedding. Indeed, in a market suffering weak demand and gross margin pressure, cutting the cost cloth accordingly is the key lever available to management to support margins and profits.”
In the coming weeks, managers affected my the Asda move will either start training for new roles or take a severance package.