Financial services firm Moody’s has warned Asda’s credit rating is under threat if it does not turn around its performance.
The company stressed that chair Allan Leighton urgently needed to resolve the grocer’s operational issues.
It cautioned the supermarket could fall behind Morrisons. Despite the northern rival being issued a weaker B1 rating, it recently saw full-year profit rise and its “strongest” quarter since 2021.
Asda was issued a ratings upgrade by Moody’s from B2 in April. However, the credit ratings business warned “since then its credit quality has weakened, with the prospect it could decline further if it does not address its operational difficulties in the coming months”.
Moody’s said: “In tandem with battling for market share in a highly competitive market, Asda has faced substantial operational hurdles, related to customer service, store experience and product availability.
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“The Asda team still needs to demonstrate a strong execution track record in addressing all operational issues effectively.”
It comes as Leighton has made a series of early indications of how he plans to restore the grocer’s performance, including appointing former Asda execs and spearheading the reintroduction of Rollback and Asda Price.
The agency added: “The wrap-up of Project Future, combined with management’s efforts to refine its customer rewards programme, boost product availability and upgrade the overall customer experience while keeping prices low could support stabilising its market share.
“However, significant execution risks remain at this stage.”
An Asda spokesperson said: “The report highlights that Asda is a larger and more diverse business than Morrisons, with a notably higher credit rating and stronger free cashflow generation.
“We know there are some areas where we need to improve to deliver a consistent experience for our customers and we are addressing these as a priority.
“This includes putting more resources into our stores and launching Rollback and Asda Price to reduce prices across our entire product range.”
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