Asda is to buy Netto Foodstores to compete in the smaller store sector in a move that follows the announcement of plans to expand its home delivery business
It is paying £778 million for Netto which operates 193 stores in the UK. The move is part of its strategy to develop its smaller stores business – sites of less than 25,000sq ft.
All Netto stores in the UK will continue operations as usual under existing management while waits for approval for the deal from the Office of Fair Trading which is expected later this summer.
The move will mean further changes for Asda’s supply chain – it recently announced an extension of its home shopping business with the opening in of a new picking centre at Enfield in north London in July.
Last autumn logistics company C Butt won a five year contract to handle distribution for Netto which has depots at South Elmsall near Pontefract and Daventry in Northamptonshire.
Asda’s smaller format store at Pontefract.
Asda has lagged behind Tesco and Sainsbury’s in developing its presence at the smaller end of the market, and in February, former president and chief executive Andy Bond set out the retailer’s ambitions to expand into this sector.
It expects to complete the refurbishment of the Netto stores to trade under an Asda fascia by the middle of 2011. It said that it intends to increase the number of staff at each store and transform the range available to enable customers to complete a full weekly shop.
Netto was set up in 1990 the UK by Danish group Dansk Supermarked, itself a subsidiary of AP Møller – Mærsk. Its stores at an average 8,000 sq ft.
Asda’s new president and chief executive Andy Clarke said: “Customers will benefit from low prices on a significantly broader range of quality products, complemented by the wide range of services we offer in all our smaller stores.
Asda’s like for like sales in the first quarter were 0.3 per cent in the first although total sales grew in the low single digits. The group said profits for the period grew ahead of sales, beating internal targets.