By and  on July 6, 2005

LONDON — Asda, Wal-Mart's European division, plans to lay off 1,400 workers in a bid to cut costs and regain its share of the intensely competitive U.K. market.

Some 200 management jobs will be phased out at the company's head office in Yorkshire, and 1,200 retail management positions at Asda stores will be cut in order to focus on frontline customer service. Asda employs 140,000 people in the U.K.

"It's as if we woke up, looked in the mirror and realized we'd gotten flabby," said Andy Bond, who took over as president and chief executive officer in March. "We have to get fit, and that's a painful process. Moreover, we don't want to gain back the extra pounds."

Bond said at a press conference Tuesday that the costs of running a major retail chain were climbing at a dizzying rate. "Next year, fixed costs will be circa 20 percent higher than last year for all retailers. The treadmill for running a business is getting steeper."

Bond said he wasn't satisfied with Asda's "average performance" this year. "Our natural home is out performance, and today's changes put in place the teams that will reignite our business over the next 12-18 months."

Bond added he was confident about Asda's smaller supermarket formats, the stand-alone George stores, and the future of nonfood. "I see nonfood as part of the overall reason of why people want to shop at Asda," he said.

The press conference was held at the new London design studio Asda has opened for George, its $1.76 billion, or 1 billion pound, clothing and accessories label. The company is reinforcing the infrastructure behind George, with the goal of turning it into an international fashion brand.

Bond also disclosed several management changes. David Cheesewright, 43, who served for 12 months as chief operating officer of Wal-Mart in Canada, will become chief operating officer and trading director at Asda. Cheesewright replaces Bond, who left that role to become president and ceo. Cheesewright will begin Oct. 1.

Andy Clarke, 41, will return to Asda as retail director, a position he left in 2002 to work at Matalan and Iceland. Clarke, who will also be responsible for Asda's financial services business, will begin Sept. 1.Angela Spindler, 42, will take on the new role of customer and strategy director on Oct. 1. She will be responsible for marketing, the Asda brand, customer service, format development and business strategy. She was formerly trading and marketing director at the store.

Asda revealed the cuts three days after Wal-Mart said comp-store sales in its U.S. stores rose 4.5 percent in June, exceeding the company's own guidance of 2 to 4 percent. This marks Wal-Mart's biggest monthly gain in 13 months. Strength was seen in seasonal merchandise during the reporting period. For the week, general merchandise comps were stronger than food. The Northeast was the strongest region.

Wall Street took the strong Wal-Mart results as an indication that perhaps gas prices aren't weakening consumer spending. Shares of Wal-Mart closed Tuesday at $49.80, up $1.52, or 3.15 percent, in New York Stock Exchange trading.

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