Complacent Asda admits recovery is still two years away

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Andy Bond, the chief executive of Asda, conceded that his company was "operationally failing" yesterday, blaming the supermarket chain's tough times on "complacency" in recent years .

Speaking at the company's first analyst presentation for almost six years, Mr Bond said that he may now need as much as two years to turn Asda's fortunes around - some 12 months longer than he had originally planned when he took over as chief executive eight months ago.

However, he said that in spite of the supermarket chain's tough times, it had a sound strategy. "It's absolutely true that we're operationally failing in some areas at the moment - and it's very important that we understand what's wrong and what we need to do about it," he said. "The business is not broken. We do not need a new engine ... but we are in for a major service at the moment. We have a strong strategy. The issue is we've failed to implement that strategy."

Mr Bond said the supermarket's problems had been heightened by the increasingly demanding nature of UK consumers and the improving position of its competitors such as Sainsbury's and Morrisons.

Sainsbury's is set to overtake Asda in the sales rankings next month, reclaiming its position as the second-largest UK supermarket chain.

Mr Bond said his restoration of the business would be based on "five simple building blocks". These include lowering its prices more aggressively than its competitors, improving its fresh food offering, and reinvigorating its George clothing division.

He said the company is about to test-launch a new Asda "Convenient" store, which will compete against the likes of Tesco Metro and Sainsbury's Local.

Mr Bond tried to scotch speculation that Asda's US parent, Wal-Mart leaves him little freedom, saying that the company's restructuring had 100 per cent US backing. He would not rule out a UK takeover in the medium term, highlighting Wal-Mart's financial strength in the event that Asda found a suitable acquisition.