Allan Leighton: can Asda’s comeback kid do it again at 71?

Asda is box office news right now, with every twist and turn of the rollercoaster ride dominating the news agenda on thegrocer.co.uk. (At one point last week, four of the top five stories on our website involved Asda.)

But the revelation that Allan Leighton is back at Asda – running the show again after an almost 25-year absence – is extraordinary by any standards.

Of course, if you’re one of the 500 or so head office executives Asda jettisoned earlier this month (on the eve of Christmas) the appointment of one septuagenarian (the 71-year-old Leighton) to replace another (the 75-year-old Stuart Rose) as executive chairman isn’t that big a deal.

But this is the comeback to end all comebacks. When one considers other so-called ‘boomerang’ CEOs, has there ever been such a gap? Apple’s Steve Jobs returned after 11 years; Starbucks CEO Howard Schultz eight years; Twitter’s Jack Dorsey seven years; Disney’s Bob Iger: five years. The gap between Allan Leighton’s legendary first stint and his return is almost prehistoric by comparison. 

But the £6.8bn question is: what is Asda playing at? And will it pay off?

Recreating Asda’s glorious past

It’s not difficult to understand what’s going on here. After its disastrous takeover, Asda’s new shareholders – a private equity consortium comprising TDR and the Issa brothers – want to recreate Asda’s glorious past. And what better way than by hiring Leighton?

Steeped in Asda’s DNA, Leighton understands the northern grit of Asda’s core shoppers implicitly. “We knew what working people were long before Keir Starmer,” he told me when news of his appointment broke this weekend.

And crucially Leighton has the common touch with colleagues too: right down to his trademark flat cap, he cultivates an image of a man of the people, reassuring store managers and head office staff in a way that the cravat-wearing Rose could never hope to pull off. 

It’s true other Asda alumni, such as Andy Bond, Tony de Nunzio and Judith McKenna, have strong experience of Asda’s DNA too (and are younger), but none (presumably) were available. And none can match Leighton’s experience: he was there in Asda’s darkest hour, when it was weeks away from going bust – forming a pivotal partnership with ex-CEO Archie Norman.

And there’s no motivational speaker that’s followed him inside Asda quite like Allan. He’s written the book On Leadership quite literally (and gives the profits to Cancer Research alongside his earnings from TV and speeches). If anyone can get Asda’s demoralised workforce excited and remotivated, who can make colleagues believe again, it’s Leighton.

But will he be a success second time around? The evidence for so-called ‘boomerang CEOs’ isn’t great. Of course, there have been exceptions, most notably Steve Jobs at Apple, but research from MIT Sloan business school shows returning CEOs in the US performed significantly worse than other types of CEOs. On average, the annual stock performance of companies led by boomerang CEOs was 10.1% lower than their first-stint counterparts. Why will it be any different with Leighton here in the UK?  

It’s true that Asda has amazing superstores in terms of revenue. (Which have been ignored and underinvested in amid the focus on hastily rolling out a complementary convenience offer.) And the George fashion business – which Leighton helped to pioneer – is still a very powerful brand. 

It’s also true that the threat from discounters isn’t new. Leighton’s price-cutting antics – lowering prices by 10% overnight – helped see off KwikSave in the early 1990s. So maybe he can pull off the same trick with Aldi and Lidl. 

Asda’s millstone

But the biggest difference since Leighton was running Asda isn’t the market. It’s Asda. As a leveraged buyout, Asda’s interest rate payments run to over £500m per annum. Money that could be invested in price cuts is instead being channelled into the banks that helped fund the acquisition.

So the tactics that first helped Asda under Leighton won’t be so easy to come by. That’s true of another tactic he employed in those early days: cutting costs. Asda has already pared them to the bone with brutal store and head office redundancies. 

And there’s a final problem that won’t be easily solved. At the age of 71, Leighton is still sprightly, and has lost none of his optimistic, can-do attitude, as town hall meetings at Asda HQ today showed. And the hope is that having such an experienced leader as executive chairman will help Asda to recruit a new CEO, after three doomed years of trying. 

But even if Leighton can work his magic, and find someone to take on day-to-day responsibility, freeing him up in the future to take the more conventional backseat role that has been his hallmark in other companies he’s chaired, Asda still faces a likely 12-month non-compete. So there will be some late nights ahead for Leighton. And hard, hard yards.