Asda faces the threat of a multimillion-pound penalty as fears mount that the supermarket will miss its February deadline to complete a crucial £800m IT overhaul, known as “Project Future.”
The initiative, which was spearheaded by co-owner Mohsin Issa until he stepped back from day-to-day operations in September, aims to separate Asda’s technology systems from those used by its former majority owner Walmart.
If the supermarket fails to transition to its new systems on time, it will face penalty charges for continuing to use Walmart’s infrastructure, with industry sources suggesting the fees could quickly climb into the millions, The Telegraph reported.
An Asda spokesperson told the title: “We continue to make good progress delivering Project Future and have successfully migrated large parts of our business to brand-new systems.
“We will continue to take a pragmatic approach when delivering the remainder of the programme, and Walmart continues to be incredibly supportive in every way in helping with the implementation.”
-
Related Story
-
Despite the official optimism, internal sources suggested delays were likely. One employee said: “Everyone you talk to was saying that Asda was not going to meet the deadline. IT and Asda don’t mix.”
Issues with Project Future have already caused problems for the retailer.
Last March, a software update led to tens of thousands of workers being paid incorrectly, leaving some hundreds of pounds out of pocket. Weeks later, another IT issue disrupted thousands of orders across Asda’s George clothing range, with shoppers reporting missing deliveries despite having paid.
The project, launched three years ago, was deemed “mission critical” to Asda’s turnaround plan. Mohsin Issa, who made Project Future a top priority, stepped back from day-to-day operations back in September.
He handed control to Lord Rose, who confirmed the Walmart penalty charge in an interview but denied claims it could amount to £15m a week.
At the time, Rose said: “There is a tick-up which is an incentive for us to come off their system, but it’s not meaningful in the company’s profit and loss. At the end of the day, it is not £15m a week, but there is an incentive for us to finish this on time.”
Given the ongoing issues, Rose said Asda was willing to delay the transition, even if it meant paying more.
“If you were asking me, if it meant paying a little bit of extra fees to make sure we had the safety of transition, I would pick a little bit of fees,” he said. “We wouldn’t be so stupid as to say we are not going to pay you because we want to have our own systems. We have a very good relationship with Walmart and they are still a 10pc shareholder in their business.”
Project Future’s delays added to Asda’s broader struggles since its 2021 debt-fuelled takeover by TDR Capital and the Issa brothers. Asda’s market share has dropped from 14.8% to 12.5% since the acquisition, and the retailer recently reported its worst Christmas performance since 2015.
Asda must also meet a £900m repayment to Walmart by 2028. The company’s new chairman, Allan Leighton, has launched job cuts as part of a wider restructuring to reduce costs. Earlier this month, 13 regional managers were axed.
Despite the challenges, Asda insisted it was making progress. “We continue to make good progress delivering Project Future,” a spokesperson told the Telegraph
Click here to sign up to Retail Gazette‘s free daily email newsletter
