Asda Q&A: Allan Leighton on deep pockets, loyalty cards, bench strength and online

It’s four months since Allan Leighton returned to Asda. And already the executive chairman – whose turnaround of the Leeds-based supermarket chain in the 1990s is the stuff of retail legend – is having a dramatic impact. Announcing its annual results last week, revealing like-for-like sales fell 3.4% in 2024, Leighton spelled out plans to “materially reduce” profits this year to invest in better prices.

It was not a profit warning, he insisted. It was “an investment warning”. And it was enough to give investors in Tesco, Sainsbury’s and Marks & Spencer the vapours, wiping £4bn from their combined share values by Tuesday. 

But Leighton was under no illusions that there is no quick fix to Asda’s ills. So what exactly has he found in his first few months at the business? In an exclusive interview with The Grocer, Leighton reflects on the progress to date and the plans that are taking shape.

So, Allan, this is not the first time you’ve been brought in to turn Asda around. How are you finding it? Is it easier or more difficult the second time around?

I’ve loved every minute. I’m working six days a week, 14 hours [a day] probably, but I just happen to love the business and I feel we are making some progress. 

It’s not dissimilar. It’s equally hard. Last time we didn’t know what we were doing, though. We found out as we were going along and had to learn what the Asda culture was. Now we know what it is. A large part of what we’re doing is recreating that Asdaness.

It’s also about basics, about price, range and availability. It will take time, and we learnt from the last time not to do quick fixes. To do things that are sustainable.

We’ve put hours back in – we’ve put about six-and-a-half, seven million hours into the stores.

The stores are absolutely the heartbeat of the business, they absolutely get it. I think people have got a bit of hope. 

Fundamentally, the biggest part of our success last time was from our colleagues, who sold with a smile on their faces because they loved the business. We lost that. We lost the heart and minds of our people, but we’ve started to win that back. That’s the most significant change this time.

You’ve brought back the Rollbacks but we’ve yet to really see a meaningful impact in our Grocer 33 pricing analysis. Where are you up to with that?

As I said on Friday, this business has to invest in growth. It’s as simple as that. We will bring our profit materially down this year as we invest in the business, because I’d rather have controlled investment than uncontrolled decline.

We’ve already invested a ton of money in Rollback and the idea is a 12 to 18-month programme. We’ve probably done 20% of the range, and we will do 80%-90% of the range. My whole thing is we are rolling back to Asda Price, so that in a year’s time I’ve got two thirds of the range at what I can describe as Asda price. TDR have been incredibly supportive of that.

What about shoppers? They’ve been leaving in their droves. They’re clearly not happy.

[Only] until we fix the basics. People say that everything has changed in retail. It absolutely hasn’t. People want the same things they always did. They want great prices and products that are available and they need great service. When we’ve got, as we have had, very poor availability, that ain’t gonna help. But we’ve started to move that, particularly in the last six or seven weeks, although we’ve still got some way to go

On pricing, I’m used to a 5%-10% gap compared to everybody else. That’s the model, but we didn’t have that gap. So now we’ve opened one up and we’re going for 5%-10%.

When it comes to the quality of the shop, some of our fixtures are all over the place because there’s no architecture. That’s getting changed.

But all of this takes time. You don’t just do it overnight.

Read more:

• Asda’s Allan Leighton axes 6,000 SKUs and warns of major profit drop

• Asda ends 100% British chicken pledge as it sources from Germany

What about morale at head office? There’s been repeated rounds of management cuts

Morale is still very good. I’m fasting today, alongside my colleagues who are going through Ramadan. I got up at four o’clock this morning, had some porridge and drank three bottles of water. There are loads of us all going through it. I’m so thirsty it’s unbelievable.

But it goes to show the morale in here is pretty bloody good. People need leadership, they need a clear plan and they need to buy into it. If you get that and make it a bit of fun, and you do things at pace, then the whole morale thing is very strong.

There is a love of the business in Asda that I’ve never seen anywhere else. It’s quite humbling. We made some changes last week and I’ve had three or four emails from people who were made redundant, who said ‘I’m very sorry to be leaving the business at this stage, because I think we’re doing exactly the right thing and I love this business’. 

And don’t forget, we are also recruiting people. Whilst there are some people going out, there are also a lot of people coming in. We are investing in the business in every which way, whether it is cleaning, whether it’s hours, whether it’s people, whether it’s price. People see that. Our strength is that we are a family.

Are you bringing in the right calibre of people? When you were last running Asda you had people like Mike Coupe and Justin King, future CEOs, in mid-tier management. What are you seeing now in terms of bench strength?

About 50% of the people we’re bringing in are ex-Asda, and that’s quite good because they understand the language. Ade [McKeon] has come back. I’ve brought in Jo [Whitfield] as a non-exec. We’re not having any trouble recruiting people at all.

We’ve always been the mavericks and there are a lot of people who like to be with the mavericks. We have plenty of people incoming and there will be more. You can always improve the bench. When I was here before, and I had to get everybody from Mars – we couldn’t get anybody from retail because they thought we were going to go bust.

People said, what do they know about retail? But they knew about products and they knew about people. You need a balance of people who are really good at retail and people who are good at products. 

What about the search for a new CEO. How’s that going? 

I’ve had at least nine [applications]. I obviously talk to lots of people and I know a lot of people, and at least that number have said to me, ’Look, Allan, if you want me to come in as CEO, I’d be up for it.’

I’m going to take my time. It was important for me to find out what we needed to do – which I think we are getting there with now – and then get a plan that would work, and most important get TDR to support that plan.

The thing with a new CEO is the cultural fit. There are a number of people I’ve spoken to who would be a very good CEO. But when this business was voted the best place in Britain to work, it was because it had that cultural element. We’ve lost a bit of that, and now we’re getting it back, it’s critical that person buys into that culture and can add to that culture. And remember, this is a five, seven, 10-year job. It’s not a three-year job. We need a CEO who’s going to come in and do five to 10 years. Apart from my own self-pressure, we’re under no pressure to do things quickly because everyone understands we’re trying to do things for the next 10 years, not the next bloody 10 months.

Read more:

• Asda cuts 200 jobs in latest management shake-up

• Former supply chain boss Gavin Chappell returns to Asda

• Asda debuts revamped cafés under new ‘Asda Kitchen’ brand

On Friday, you announced a major range reduction. How is this SKU cull any different to previous attempts, such as Andy Clarke’s Project Renewal?

We’ve got about 30,000 SKUs, and we probably need about 24,000. We are built on VPIs: volume producing items. The whole point of Asda is you drive volume from all the lines you carry, and when you’re over-SKUed you have too many slow-selling lines which clog up everything.

They are taking space in store and taking up slots in the DCs. I did this when I was here before. Every year I was here, I cut 10% of the range. We’ve done a really good piece of work that’s looked at what the optimum range looks like and we’re taking out about 6,000 SKUs between now and the end of the year.

We did the original renewal. Clarkey I think did about version six. We know it works. We’ve got aircraft carriers [of stores] and they need volume and if you fill these things with volume the cash comes pouring out the bottom.

Where will the cuts come from: food or non-food?

Remember, George is the second retailer by volume clothing in the UK, and my objective is to be the number one online clothing retailer by volume and the number one offline clothing retailer by volume. We have absolutely got the capacity to do that.

Walmart were brilliant at GM, and I can see in our GM ranges that has really stepped on, more so than with food. We just need to build on the food businesses, because it’s the food business that brings the traffic, and the conversion opportunity on George and GM is very high. But it goes with the traffic. Bring the traffic in, you’ll get the conversion.

The way you drive that is not just about cutting lines, it’s about getting the pricing right. We cannot sustain being the same price as everyone else. That doesn’t work for us. That’s why the most important thing is to get that 5%-10% gap.

Number two is to get our availability back into the high nineties. When I left here, it was 99.1%. We’ve probably added four or five points of availability in the last six or seven weeks and that’s making a difference. Then you have to be able to be able to see the products. Once you’ve got the pricing and availability right, cutting the range is the only way to grow the business. It’s a trilogy of events. Actually, wasn’t that an Emerson, Lake & Palmer album?

You’ve folded the management of the IPL sourcing and logistics division into Asda’s central management? If that’s such a good idea, why didn’t anyone do it before?

That’s not for me to judge. But as an integrated business that should be able to give us better prices, better produce, better freshness, better availability. That is the whole point, so it needs to be brought back into the business, not run as a side business.

That should be a significant competitive advantage for us and that’s why we made the change. Why it wasn’t set up that way, I don’t know. But I do know the best way in food is to set things up in a vertically integrated way. If you’ve got that capability. It’s something Morrisons have done for a long time. Ken [Morrison] built his business on it. We’ve put it back to that. Kris [Comerford] now has visibility on everything from the fresh team.

You’ve already stopped price matching Aldi and Lidl. Would you consider dropping the loyalty card?

We ditched price match because I’m not going to advertise other peoples’ brands or stores or in my advertising. I’m prepared to talk about ours, not anybody else’s, prices. By the very nature of matching, we were telling everyone what good prices they had. It’s a complete and utter nonsense. So that for me is just ridiculous. And that got stopped on day three.

On rewards, what we’re going to do is democratise it. That means that if you shop at Asda, whoever you are, you should get the same price, the lowest price, and you shouldn’t get something that somebody else doesn’t get.

My whole thing with loyalty cards, which will come home to roost, is that people who don’t have one think they’re paying more so other people can get it for less. That’s what consumer surveys tell you. So I like the idea of reward but I want it to reward everybody who shops with us, not just certain shoppers, and that is a very compelling idea when you put it alongside Asda Price and the 5%-10% gap.  

Aren’t you worried about the discounters? They weren’t really a feature of the market when you last ran Asda.

There was Kwik Save, which was a version of today’s discounters. It was a FTSE 100 company – everybody forgets that. Also, I think if Asda had stuck to its roots the discounters wouldn’t have grown as fast as they have.

People have let the discounters in, but if we’re 5%-10% lower than the other supermarkets, we immediately push down on the discounters. Interestingly, a lot of our lost customers haven’t gone to the discounters. That’s not been the major customer loss. It’s been to the traditional businesses.

But I also think we have two other advantages. Online, there are no discounters. We will be the discounter online. And the other thing we have is we’ve always over-traded on brands, and we can be the discounter for brands. Brands aren’t in Aldi and Lidl to the scale they are in Asda, so we are a really good port of call for them if they want to attack that part of the market.

Does TDR have deep enough pockets for the scale of investment required?

I can’t comment on the depth of their pockets, but they have absolutely bought into this. As you can imagine, that was quite a big deal on Friday. A material reduction in our profitability is quite a big deal. We generate on average £600m of operating cashflow. We’ve got £800m on the balance sheet and £9bn of assets.

I’ve been very candid. The only time I’d be worried with our debt is if I thought we couldn’t invest in the business because of it and that’s not the case. The most important thing we need to do is grow the like-for-likes, because then you get the volume going through those stores.

What are your thoughts on the increased costs from regulation and tax, such as extended producer responsibility, the deposit return scheme and increases in NI and the minimum wage. Do you have any message for the chancellor?

No, not really. Only that it would be great if you didn’t do any of those things, but that’s not going to get us very far, is it? I’m a pragmatist. My sense is all those things are gone. We can all lobby against it but I work on the principle that it ain’t going to change anything.

And it may work to our advantage, because we are probably the only ones investing in our business at the scale we are, whereas the pressure on everyone else is just to manage their cost base.

Read more:

• Allan Leighton ‘right not to award Asda managers bonus’

• Asda Income Tracker: cost of essential goods and services rises at fastest rate since March 2024

When you say you are investing, can you put a figure on it?

No, but it’s material. And we can see that people think that’s the case because of the reaction in the markets over the weekend. And of course, we also brought the price of fuel down by 4p per litre on Friday, which plays to our strength in fuel.

This is probably the toughest, most professional retail market in the world. What happens to anyone else is not down to me. I can only influence what happens to us and that’s what I keep saying to everyone. Stop worrying about everyone else and let’s just focus on ourselves.

A few years ago there was a lot of talk about what Asda was going to do with all the spare space in its stores. Now there’s lots of concessions and food to go options and the like. What is your view on how to use your sheds?

My view is we need to utilise the space we’ve got to sell what we’re really good at selling, which is food and non-food. The one thing that has changed is the online business has become quite big, but they are all picked from store. Because we’ve got big stores, that method for us works really well because you’ve got lots of space to move around.

We have great stores. I think we still have 40 of the top 100 stores in the UK by sales. They are battleships. We just need to be really good at what we do.