Cost of Asda's tech separation from Walmart nears £1b amidst delays

Now more than five times its original budget

Asda’s IT separation from former majority owner Walmart is set to cost nearly £1 billion, with the retailer allocating an additional £175 million to complete the project.

The supermarket giant has seen its tech separation costs rise as the project, known as Project Future, is now expected to run into the third quarter of its fourth year, exceeding its original three-year timeline.

According to a report in The Times, Asda informed bondholders last week that the project’s costs had already reached £900 million and would rise further this year.

To avoid potential penalties, Walmart has agreed to grant Asda an extension beyond the original February 2025 deadline.

Project Future began after Asda’s £6.8 billion acquisition by the Issa brothers and private equity firm TDR Capital in 2021. Initially, Asda allocated £189 million to the IT split, but the budget has since escalated. By the end of 2023, spending had already reached £430 million, and now the total cost is expected to hit £1 billion.

Although a spokesperson from Asda recently told The Registerthat costs related to the project are expected to drop as it nears completion later this year, the mounting expenses have raised concerns about the financial impact on the UK’s third largest supermarket as it works to strengthen its market position.

As part of its efforts to manage costs, Asda recently axed over 200 employees connected to its IT upgrade, marking the second round of redundancies in less than a year. These layoffs follow the transfer of about 135 IT roles to Indian outsourcing company Tata Consultancy Services (TCS) last year.

The company is said to be reviewing other cost-saving measures, with plans to outsource more roles overseas on the table.

The outsourcing proposal adds to recent decisions aimed at addressing declining profitability and market share under chairman Allan Leighton’s leadership. With its market share falling from 13.7% to 12.6% over the past year, Asda remains the only major UK grocer reporting declining sales during this period.

Despite these challenges, Asda has been actively expanding its convenience store footprint. By the end of last year, the superstore had converted 234 sites into Asda Express stores, and plans to open more standalone stores this year.

The retailer aims to roll out 300 new convenience stores by 2026 to further solidify its presence in neighbourhoods around the UK.