Asda Planning Sale & Leaseback Of Stores To Raise Cash
Asda is hoping to raise around £400m from the sale & leaseback of 20 of its supermarkets to fund its turnaround plan.
According to property-focused publication Green Street News, the struggling retailer has appointed real estate adviser Eastdil Secured to seek out buyers.
Sale & leaseback deals are popular among major supermarkets as a means of raising capital to shore up their balance sheets, with Sainsbury’s and Morrisons completing deals in the last few years.
An Asda spokesperson said: “Sale & leasebacks have been a feature of the retail industry for many years.
“While maintaining a strong freehold base remains central to Asda’s property strategy, we will consider suitable opportunities to unlock value from our property portfolio as part of our material programme of investment into the business.”
Allan Leighton, who returned to Asda at the end of last year as Chairman, has pledged to turn around the group’s fortunes by cutting prices, improving product availability, and refreshing tired stores. Analysts have estimated that the plans will cost close to £900m over the next three years.
Back in March, Leighton warned that the investment drive would “materially reduce our profitability this year” but said he had “a pretty significant war chest” to tackle several years of weak trading at the supermarket.
However, with debts of £3.8bn left over from the takeover by TDR Capital and the Issa brothers in 2021, it has been suggested that Asda has limited firepower for a prolonged price war with its rivals.
NamNews Implications:
* Can be a good source of cash…
* …to cover the cost of turnaround plans (£900m).
* So sale & leaseback process will continue until that point is reached, at least.
* But the business patently then has to cover the cost of rent that it previously owned..
* ...thereby diluting the bottom line...
* It ain’t over yet…
Asda SalenLeaseback
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