Back in November, Allan Leighton, the former CEO who has now returned as executive chairman, went on record as saying that it could take three to five years to revive British supermarket chain Asda Group Ltd’s fortunes. A sobering assessment, however, reveals that even a cursory look at the business reveals that it is facing challenges on multiple fronts. The business clearly needs strong leadership and as one former Asda senior executive who worked under Leighton told Fortune, “Allan is inspirational and probably the best person for the job. However, Walmart spent the last decade removing the entrepreneurial spirit from the business so that people stopped thinking for themselves”.
The grocer, whose debt is currently around £6 billion ($7.4 billion) is facing an impending £900 million ($1.1 billion) bill due by 2028, which could threaten the chain’s entire capital structure, according to credit rating agency Fitch. The former senior exec confirmed, “When a business is laden with that much debt, they’re in big trouble”.Going on to say that, “It probably can survive, however, it’s all about surviving from one quarter to the next in order to service the debt”.
On top of that, Asda was the only major supermarket in the U.K. to see its sales decline in the lead-up to the crucial Christmas trading period. Data from NIQ shows that the grocer’s market share slipped 1.1 percentage points to 12.1% as sales fell 4.2% in the 12 weeks to 30 November. As previously reported in Fortune, these are not the only items on Leighton’s to-do list.
“Restore Asda’s DNA”
Former CEO and now returned as executive chairman, Allan Leighton.
Asda also faces a potential £1.2 billion ($1.5 billion) equal pay claim in the first half of 2025. Then there are the measures announced in last year’s autumn Budget. From April employers will be charged national insurance at 15%, up from 13.8%, and the threshold at which they pay the tax has been lowered from £9,100 ($11,284) to £5,000 ($6,200). Added to this, the minimum wage is rising by 6.7% to £12.21 ($15.14) with business rates for the industry increasing by £140 million ($174 million).
Speaking to the Guardian on his first day on the job, Leighton said that he wants to “restore Asda’s DNA” on price and ways of working, improving availability, and recruiting a new chief executive.
He intends to produce a revival plan for the business by the end of January, so what else should it contain?
- Tech. It has been a painful divorce from Walmart for Asda’s IT systems and failures have plagued the grocer in recent months; issues with self-checkouts, failures in store picking systems, payroll errors, and the website crashing are just some of the outages reported.
- Customer experience. I visited stores in Surrey and was struck by the poor availability across multiple lines. Some confusing pricing, unclear point-of-sale signage, and some very tired-looking gondola shelving combined to detract from the in-store experience. Even the Aldi and Lidl price match was half-hearted at best.
- People. For many years, Asda has not enjoyed a close relationship with the unions. In May 2023, it threatened to fire and rehire 7,000 workers over a pay dispute. A year later it was involved in a dispute with the GMB union over pay and has been criticized over its treatment of workers, especially involving suppliers committing labor rights abuses. With a resurgent Morrisons headquarters just 10 miles away, this poses a major threat to attracting and retaining talent.
- Reputation. According to Trustpilot, Asda is ratedat 1.4 with customer complaints ranging from online customer service, availability, click-and-collect app pricing errors, and cancellation of online orders.
All these are fixable, although some may take longer than others. What is possibly of most concern, however, is the lack of effective leadership since the departure of CEO Roger Burnley in 2021. He left the business after a disagreement over strategy, since when, Asda has experienced years of instability, during which time, to make matters worse, its rival, Morrisons, is experiencing a resurgence, thanks to new CEO Rami Baitiéh, an experienced and respected retailer.
Leighton needs to find a heavyweight CEO, and quickly.
