Allan Leighton faces a back to the future challenge as he once again takes charge at struggling Asda. Two decades on from his first spell turning around the supermarket chain, he has been appointed as its executive chair, tasked with repeating the feat.
When Leighton, 71, left Asda in 2000 it was a scrappy challenger to Tesco and Sainsbury’s and he had just revived the chain and engineered a sale to Walmart for more than £6bn. Now, it is a lumbering incumbent with 580 supermarkets plus more than 500 convenience stores and risks losing its spot as the UK’s third-largest grocer to a new generation of cheaper discount rivals and small high street stores.
First time round, Leighton helped save Asda from collapse with then chair Archie Norman, now chair of Marks & Spencer. Here is what is in Leighton’s in-tray as he tries to get the troubled business back on track once more.
Finding a chief executive
Leighton’s No 1 job will be finding a retail expert to tackle the business basics that have gone awry since the £6.8bn takeover in early 2021 by Blackburn’s billionaire Issa brothers and private equity firm TDR Capital.
Several candidates are believed to have turned down the position – which has been vacant for three years. Mohsin Issa, one of Asda’s co-owners, was leading the supermaket until September.
Leighton, who has a reputation as a hands-on, down-to-earth executive, has a bulging contacts book from his slew of boardroom positions. These included roles at BHS, Leeds United and Royal Mail.
Most recently, Leighton spent a somewhat bumpy eight years as chair of the Co-op Group, where he helped the mutual recover from the near collapse of its banking arm.
At the Co-op, Leighton worked with Richard Pennycook, a turnaround specialist who helped restore Morrisons. He is now on the board of chicken supplier 2 Sisters and kitchen maker Howdens so appears an unlikely hire.
The current Co-op boss, Shirine Khoury-Haq, has been unafraid to cut costs while pulling a strong team together, so may be a possibility, and there is also ambitious Co-op food boss, Matt Hood, to consider, although his experience is in small stores.
Leighton is more likely to focus on those with large supermarket experience and perhaps an Asda connection. He will want young blood – someone with experience and energy who is prepared to build a name for themselves in a difficult job.
Tackling debts
The marketing expert is tasked with reversing the slide in sales as it wrestles with IT issues and heavy debts since the takeover.
Asda’s difficulties largely stem from its £8.5bn debt burden, including lease liabilities, which has curbed its ability to cut prices and invest in stores. Net debt stands at £3.8bn. Rival Morrisons sold off assets including property and petrol forecourts to lower its debts, but Asda has fewer options, having already raised millions from property deals.
Rebooting IT
Leighton will be keen to quickly plug the gaps on the shelves and other problems which have stemmed from struggles to separate Asda’s IT systems from Walmart. The new systems have already required more than £800m of investment and the switchover is not expected to be completed by a December deadline, potentially leading to additional payments to the American grocery giant.
Getting retail basics sorted
Asda has struggled to find a new identity since its position as the UK’s cheapest supermarket was stolen by discounters Aldi and Lidl. Leighton will need to decide whether to prioritise competing either on price, quality or range of products.
The group has a major asset in its George clothing and homeware ranges, and had been closely connected to British farming. But it has a tricky road to navigate with neither the scale of Tesco nor the efficiency of Aldi and Lidl to help it compete on price.
Climbing the league table
Asda’s stated aim was once to overtake Sainsbury’s to become the UK’s second-largest supermarket chain. It has a market share of 12.5%, behind Sainsbury’s on 15.5%, according to research firm Kantar, so it has plenty of ground to make up.
Leighton’s appointment does not exactly bring fresh eyes to that challenge – the supermarket has swapped one septuagenarian – the 75-year-old exiting chair Stuart Rose – for another.
Leighton has said Asda is a “special place” for him, arguing “the potential for Asda now is significant”. Has that motivation tempted him back to fight for market share?
A pay deal rumoured to be in the multimillions may well have also been behind his return, but he will find a very different business to the one he left.
