ASDA - comment
Fitch’s downgrade of ASDA reflects the agency’s belief that the turnaround at ASDA will take three years, with volumes and profitability only returning to 2024 levels by 2027/2028, which is what management has hinted at. We expect the UK market to remain very competitive as ASDA repositions itself. SUN/SSN holders will see further layering as the cash is raised on the asset portfolio at rates below the cost of bank debt. The initial drop in Fitch’s modelling is more rapid than our expectations, but the time taken to recover is in line. In 2025, the agency expects that revenue will be down 1.5% (with food inflation at nearly 5%, that equates to a volume drop of nearly 6.5%.