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

Asda will carry out a major range cull over the next 12 months, as a key plank in the supermarket’s fightback following a slump in sales and warning over a big fall in profits.

Executive chairman Allan Leighton said Asda planned to slash around 6,000 SKUs. A category-by-category review will be led by chief commercial officer Kris Comerford.

It comes after the struggling retailer today announced like-for-like sales fell by 3.4% year on year in the 12 months to 31 December, with revenue falling by 0.8% to £21.7bn.

Leighton, who was parachuted in in November, having become a legendary figure at Asda during the 1990s alongside Archie Norman, warned profits would be “significantly” reduced by the investment required in prices and investment in improving its stores.

Today he told The Grocer it had already begin to reduce its range by nearly 20%. He promised despite thousands of products being delisted, the result would mean more volume sales for suppliers.

“We’ve got around 30,000 SKUs and we probably need to be in the 24 to 25,000 range, so we’re probably 5,000 over-SKUed,” said Leighton.

“The challenge I’ve given Kris is to get that adjustment made in the next 12 months and we’ve already started that as we go through the range reviews and the range and price architecture by category.

“We’re adjusting both that and the way that the product is displayed on the shelves.”

Leighton said despite the short period for such a sweeping range review, Asda would work completely in line with rules on delisting.

“We go absolutely in line with GSCOP and everything else,” he said. ”Remember the idea is not to sell less, the idea is to sell more per SKU. This is all about how you do you get the right range, the right architecture?

“It’s all pretty basic stuff but it’s there to grow the business, so what I’m saying is it’s good for suppliers because they will get more volume.”

Improved morale

Despite today’s poor results and profit warning, Leighton claimed morale, especially in Asda’s stores, had improved markedly since he took on the role. This was despite another round of redundancies announced this week, with 200 staff losing their jobs, many of those having been involved with its Project Future programme following the decoupling from Walmart.

The move saw Asda’s separate food sourcing division IPL absorbed into the main Asda management, with an as-yet unannounced number of management casualties.

Leighton strongly defended the changes and said it was not driven by the need to save money.

“It’s the absolute opposite of cost-cutting,” he told The Grocer. “IPL is 100% Asda owned and 100% Asda supplied and is part of our vertical integration. Because of that  we thought it’s much better to vertically integrate it back into the business.

“It’s totally part of the growth strategy, particularly in terms of fresh food.”

 Leighton also repeated his warning that the turnaround mission at Asda was a long-term process that would take several years.

“It’s not a quick fix. A quick fix would be completely the wrong thing to do. This is start of a strategic investment as we build the business for the longer term.”

However, the Asda boss insisted some green shoots were already showing through at the retailer.

As well as improvement in morale, Leighton claimed his turnaround plans, including a major investment in price cuts with a Rollback programme across its range introduced at the end of January, had begun to see Asda regain its position as a price leader in the full-range supermarket category.

He pointed out that Asda twice topped The Grocer’s weekly ‘store of the week’ mystery shopper survey during February – equalling the total number of wins for the entire year of 2024.

But he warned that the continued investment needed in prices would have a major impact on short-term profits before it could begin clawing back share to turn around its financial fortunes.

“What we are flagging is a significant investment that will materially reduce our profit this year,” he said.

“I look at this sign of investment rather than a profit warning and a sign we have built a significant war chest.

“The big thing is not about the price it will cost Asda, but the impact it will have on customers’ pockets”

CEO hunt

Meanwhile, Leighton claims to have been deluged with senior industry figures wanting to be considered for the role of CEO at the company, which has been vacant since Roger Burnley stepped down in 2021.

But he said he was in no hurry to appointed a new boss, instead that the priority was to find a new leader worthy of taking the helm at Asda for the next decade.

“My number one task is to get a great CEO,” he said. “Let me be very clear we will have no problem in finding one

“When I led Asda we were talking about a period of 10 years and that’s what we’re looking for.

“I could appoint someone tomorrow who everyone would think was great.”

Leighton has also encountered controversy for not paying an annual bonus to more than 10,000 managers because of Asda’s poor performance.

Today he confirmed Asda was switching to an individual performance-related bonus scheme, rather than one based on the company’s financial figures.

“We are putting in place a bonus scheme, which is about what individuals do, not what the company does,” he said.

“That has gone down incredibly well.”