“It’s not bloody inevitable,” that Asda will be overtaken by Aldi as the UK’s third biggest supermarket, Allan Leighton roars as the veteran retail boss insists his turnaround of the ailing business is on track.
Leighton, the chair of Asda, who returned to lead the business in November 2024 after a 20-year absence, is attempting to defy the critics and revive Asda for the second time in his career.
About 18 months in, grocery sales and market share for the retailer, which has 580 supermarkets, 517 convenience stores and four stand-alone George outlets, continue to fall according to industry data, despite well-publicised investments in keeping prices down.
In terms of market share, its rival Aldi is now less than one percentage point away from overtaking Asda, where sales and profits have dived since a debt-fuelled £6.8bn takeover in early 2021 by Blackburn’s billionaire Issa brothers and the private equity company TDR Capital.
Wearing a pink baseball cap with a banana logo and brightly coloured trainers as he shows the Guardian around Asda’s Killingbeck store in Leeds, Leighton, 73, remains optimistic that by year 3 the business will have turned a corner.
He admits that “Project Future” – the transfer of Asda’s technology from former owner Walmart’s systems to its own at an estimated cost of close to £1bn – left gaps on shelves and put plans six months behind schedule.
The IT is now “stable”, he says, with only smaller jobs to do, availability has improved dramatically and a new deal with Ocado will help modernise Asda’s online business from next year while the business’s latest marketing campaign encourages shoppers to “take a fresh look”, with Leighton saying prices are coming down relative to competitors.
Pointing out a new tropical tree display for bananas, complete with fake parrots, which graces the entrance to the Killingbeck store, Leighton says it doesn’t just add fun to the store. It has helped drive a 10% increase in sales of this prime shopping list item, he says.
“Nobody else can do things the way we do it. We are trying to accentuate that,” he says.
“We are more than a supermarket. Everybody thinks we are a supermarket, we are not. Almost 50% of our business does not come from food.
“Where we can win, not just over Aldi and Lidl, but everybody else, is we are the only ones that has that scale in clothing and general merchandise.”
He is attempting a business turnaround in a tough climate with strong well-funded competition. As Leighton says, “the consumer’s confidence is shot” and inflation on food is building again. “We’ve seen bits of it beginning to come through now,” he says.
All retailers are under pressure from rising labour, energy and regulatory costs as well as a squeeze on household spare cash. However, Leighton says: “If we get it right, then we’ve got more ammo than anybody else.”
Asda has four cornerstones, he argues: superstores; the George brand; fuel; and convenience stores, with online the future. “We can be the online discounter,” he says.
Industry gossips may predict the sale of Asda’s Express convenience store chain, the reheating of a merger with Sainsbury’s or even fellow northern-based chain Morrisons, but Leighton says that that is not the way forward.
“We went down that [road] before with a not very good ending,” he says about a predecessor’s planned deal with Sainsbury’s, which was blocked by the competition watchdog in 2019. “It’s not on my radar.”
Instead, his focus is on “just be better today than we were yesterday. It sounds boring, but that’s the only way to think about it.”
Once the business is in better shape, he says Asda’s owners will have “lots of options” for the future.
Changes, large and small, are happening across the store. The team is simplifying packaging and ranges to cut costs while making it easier for shoppers to find what they want, using clever kit, such as stackable crates in the produce fridges or shelf-ready boxes, to reduce work for store staff, improving cleaning and adding staff hours while cutting prices on key food lines. He claims prices are now between 4% and 7% cheaper than other traditional supermarkets – Tesco, Sainsbury’s and Morrisons.
“I am not going to do anything that’s short term,” he says.
As for government help, Leighton says: “It would be good if they didn’t do anything.” He says changes to employers’ national insurance contributions and packaging taxes have made life tougher.
Leighton insists that the business is not held back by paying off its debts, saying that the £600m annual payments are equivalent to dividends for shareholders that businesses such as Tesco and Sainsbury’s pay out.
He argues that cashflow can fund the expansion of the George clothing and homewares label, already the UK’s biggest children’s clothing brand and third-largest overall fashion brand by volume. He says it has capacity to double in size to up to £5bn in sales. Leighton wants to have 500 stand-alone George stores within five years.
Another angle will be the expansion of the Asda Express stores with plans for 20 to 25 more a year.
There are no plans for additional supermarkets, with cash instead going into refurbishing about 50 existing sites each year.
Another part of the puzzle is the deal with the online grocery tech company Ocado to provide the software and kit to modernise Asda’s grocery website and support online delivery and click ’n collect from stores and Asda warehouses.
Leighton says the deal will provide “proven technology” that should reverse the fall in online sales to more like the 10-15% growth happening elsewhere in the industry. He is not planning to switch to Ocado’s robot-run warehouses, however.
Ideas are being marshalled partly with the help of the revival of “Ask Allan” suggestion system that has garnered 4,000 messages and what he calls “saunas”. These are “like a hot house” bringing staff from across the business, from operations to marketing and supply chain together to rapidly make improvements.
Fresh produce has just been updated through this process and now bakery is working on ideas such as affordable small-scale kit that can revive some in-store baking in a more cost-effective way.
The importance difference for Asda, however, is that now it has “a belief in the business that wasn’t there [before]. Bit by bit things have got better,” he says.
Some may still argue that Leighton is bananas to think he can pull off a revival of the Leeds-based chain. It turns out he loves bananas. Improving sales of the staple fruit “fuelled the resurgence of Asda last time around”, he says.
