ASDA - comment

The Q4/FY numbers were as weak as expected. Allan Leighton plans to return ASDA to its position as the cheapest of the Big 4. The price drops and additional hours will crimp Gross and EBITDA margins for the next two years. The benefits of higher sales will take time to flow through. With leverage <3x and limited maturities, Leighton has the time and financial flexibility to implement his plan. Poor stock availability had been blamed on logistics issues, but an increase in hours at the store level indicates some of the problems were self-inflicted, and due to over-enthusiastic cost-cutting. ASDA also plans to boost margins by cutting SKUs from 30k to 24k, reducing logistic complexity.