In This Article:
Struggling Asda is threatened with a multimillion-pound penalty for failing to complete a crucial £800m IT upgrade on time.
Fears are growing that the supermarket will miss a deadline next month to complete the overhaul, which has been championed by co-owner Mohsin Issa.
Asda has been attempting to untangle a web of technology systems from those used by former majority owner Walmart under an initiative dubbed “Project Future”.
If Asda is unable to move to new systems before the looming deadline, it will face a penalty charge for continued use of Walmart’s technology. Industry sources claim these charges could quickly rise to millions of pounds.
Asda executives have been set a target to complete the changeover by February, although it is understood affected workers are now being warned it will not be met.
One employee said: “Everyone you talk to is saying that Asda is not going to meet the deadline. IT and Asda don’t mix.”
Asda has faced a succession of problems with Project Future. In March of last year, a botched software update led to tens of thousands of workers being paid incorrectly, with some being left hundreds of pounds out of pocket.
A second IT meltdown weeks later disrupted thousands of orders across Asda’s George clothing range. Shoppers did not receive orders despite money being taken from their bank accounts.
Issues with the project, which was launched three years ago, have fed into the broader troubles at Asda since its debt-fuelled takeover by private equity giant TDR Capital and brothers Mohsin and Zuber Issa in 2021.
While Asda remains Britain’s third-largest supermarket, its market share has fallen from 14.8pc to 12.5pc since the takeover. The supermarket has just suffered its worst Christmas performance since 2015.
Project Future has been deemed “mission critical” to Asda’s turnaround plan. Before he stepped down from running Asda’s day-to-day operations late last year, Mohsin Issa, who owns a 22.5pc stake in the supermarket, made Project Future one of his top priorities.
He subsequently handed control to Lord Rose, who confirmed the prospective Walmart penalty charge in an interview with The Telegraph last year.
At the time, he denied it could amount to £15m a week, as some industry sources had suggested.
He 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.”
Relationship with Walmart
Given the teething issues Project Future had already suffered, Lord Rose said Asda was willing to delay the changeover even if it meant paying more to Walmart.