Asda co-owner Mohsin Issa steps back from running supermarket

When TDR Capital, the British private equity house, teamed up with the Issa Brothers to buy Asda, industry insiders wondered whether the two could make a success of their second multibillion-pound deal.
Three years on, the sceptics look set to be vindicated. The departure of Mohsin Issa, who has been overseeing the grocer’s operations while a lengthy search for a permanent chief executive continues, comes amid a decline in standards, increased competition and operational missteps that have caused the 75-year-old supermarket chain’s fortunes to deteriorate.
Mohsin will hand over his responsibilities to Lord Rose of Monewden, the chairman of Asda, to focus on his role as chief executive of EG Group, the global petrol stations operator. Issa said it was the right time for him to step back to concentrate on his role at EG.
Rose, 75, a former boss of Marks & Spencer, will work with Rob Hattrell, head of digital at the chain’s co-owner TDR Capital, the private equity firm, and a director on Asda’s board. Mohsin, 53, remains a co-owner of Asda and a non-executive director.
Moshin will become the sole chief executive of EG Group when his brother, Zuber, 52, leaves the executive position at the end of next month, when the sale of its remaining UK forecourts is completed.
However, the move comes at a time when Asda is experiencing a slowdown in sales and has lost market share to rivals including Tesco, J Sainsbury and Morrisons. Data from the market researcher Kantar showed that sales fell 6 per cent in the 12 weeks to August 4, pushing down its market share to 12.6 per cent, down from 13.7 per cent in the same period last year.
Those figures represented a decline of between 6.5 and 7.5 per cent in sales volumes and a 30 basis point slip in market share, according to estimates by Shore Capital, the brokerage.
“TDR is the majority shareholder. It can’t allow the drift that’s been going on for some time now to continue,” Clive Black, a veteran retail analyst at Shore Capital, said.
Rose admitted last month that he was “embarrassed” by the grocer’s performance. “I don’t like being second, third or fourth,” he said, “and if you look honestly now at the comparative numbers of Kantar or whatever index, we are not performing as well as [we] should be. I don’t like that.”
He said that Mohsin should step away from the daily running of Asda as the supermarket aims to revive its performance. “I wouldn’t encourage him to [intervene in operations], and I am the chairman,” he said.
One grocery executive said it was an odd move for Rose to have “aired the company’s dirty laundry in public. Things must have gotten really bad internally”.
In response to Mohsin’s departure, he said the board “respect Mohsin’s decision to move on from his role at Asda, where his work is complete”.
Asda is 67.5 per cent-owned by TDR Capital, with Mohsin Issa holding 22.5 per cent. His brother, Zuber, sold his 22.5 per cent stake to TDR this year to focus on other businesses.
The brothers have been seeking to disentangle their fortunes amid reports of a rift, which they have denied. Earlier this year, Mohsin confirmed that he had entered into a relationship with a former senior tax partner at EY after it was revealed that the company had resigned as the supermarket’s auditor last year.
A legal statement said Issa and Victoria Price were “highly private people who are in a relationship and building a life together” after reports emerged relating to the timing of their affiliation. Representatives for Issa and Price said at the time that she was not an audit partner at EY and had never worked on the Asda business.
TDR and the Issa brothers acquired Asda in 2021 from Walmart, the American retailer, which retains a 10 per cent stake in the company. EG Group was formed via the 2016 merger of Euro Garages, a forecourt retail business owned by the Issa Brothers, and TDR’s European Forecourt Retail Group.
Of the £6.8 billion paid, the majority was funded by raising £4 billion in high-yield bonds and leveraged loans, at a time when interest rates were at historic lows. Alongside a sale and leaseback of Asda’a warehouses and the transfer of the supermarket chain’s forecourts, that left the Issas and TDR needing to find just £780 million to put into the company.
However, the rapid rise in borrowing costs since the transaction was agreed, has left Asda unable to compete as aggressively on price or offer the premium experience of rivals like Tesco and Sainsbury’s. The cost of living crisis has made shoppers even more budget conscious, intensifying the threat from discounters such as Aldi and Lidl. Asda’s pricing strategy had long been its strongest suit, leading its marketing with a promise of “everyday low prices”.
At the end of last year, net debt stood at £3.8 billion, up from £3.7 billion at the end of 2022, and equivalent to three times adjusted earnings before interest, taxes and other items.
“There has, frankly, been a failure of operational management. You have to level it at Mohsin Issa, who is standing down, because he has been the most senior executive in the business,” Black said.
The supermarket chain has not had a chief executive since the well-regarded Roger Burnley left in 2021, after reportedly falling out with the Issa brothers over strategy. Attempts to find a permanent boss in 2022 were unsuccessful, with the hands-on approach taken by the Issas thought to be an obstacle.
“Most fundamentally, it’s because Mohsin is not the backseat driver, he was in the passenger seat,” Black said.
The search has resumed, led by Spencer Stuart, the headhunting group.
The question is whether Rose and Hattrell will be able to put Asda back on a firmer footing. The latter is currently the head of digital at TDR, but has previously led Tesco’s general merchandising business.
Rose has been at the centre of many other high-profile retail turnarounds including M&S, Argos and Arcadia, although this time around he will be without Charles Wilson, the turnaround specialist who was his right hand man in leading these overhauls.
Company insiders say the major strategic moves such as Asda’s entrance into convenience retailing and launching a customer loyalty app, are complete, but that it is now a matter of improving the day-to-day running of the business.
Michael Gleeson, the chief financial officer at Asda, has set out plans to invest in improving Asda’s store estate, spending £30 million in adding more staff hours to ensure that shelves are replenished more quickly and more checkouts are open at the weekend, as it hopes to rebuild customer loyalty.