An empty chiller cabinet, shelves stripped bare of Ready Brek and a disaster in the yorkshire pudding freezer, where a packet has exploded: all is not well at the Pudsey branch of Asda.

The UK’s third-biggest grocery chain is in a tailspin, losing market share to its rivals at a rapid rate. Last week, the crisis prompted Stuart Rose, the former boss of Marks & Spencer and Topshop, to step up from chair of the supermarket to take charge of day-to-day running, after co-owner Mohsin Issa retreated from executive duties.

The troubles at the chain, which runs 580 supermarkets and more than 500 convenience stores, are no surprise to many of those shopping in the Pudsey branch, not far from Asda’s Leeds head office.

“Some of the aisles have got nothing in them,” says Giselle, 63, as she trundles out with a trolley. “This isn’t my local store, but if anything it is worse there. The quality has gone down and it doesn’t look appetising.”

While there are several committed fans of Asda’s loyalty scheme, many shoppers say they now prefer to do at least some of their shopping at fast-growing German discounters Aldi and Lidl – because prices are lower.

The group’s Just Essentials budget range – hailed as a success after launch in 2022 – appeared to have a patchy presence on the Leeds shelves, even before news broke that about 40 items were being cut from the range. Many of the Pudsey shoppers say they rarely or never buy these items.

Sarah, 40, says they are “a bit hit and miss”: “Ready meals – I won’t go there. A can of beans is fine.” Barbara Wilson, in her 80s, is more vehement: “I never buy it. I tried it but it was rubbish.”

A spokesperson for Asda said: “Sales of Just Essentials products are currently 18% up year on- year.”

The shoppers’ comments may shine a light on why Asda has lost at least 1.2 percentage points of market share – equivalent to more than £2bn in annual sales – in the past year, according to analysts at Kantar. Sales have fallen in the face of rising competition and in-house difficulties.

Aldi is now within a few trolley lengths of stealing Asda’s position as the UK’s third-largest supermarket – putting the Yorkshire chain even further away from its ambition of reclaiming second place from Sainsbury’s.

The group, which was bought by the billionaire Issa brothers and private equity firm TDR Capital in a debt-fuelled £6.8bn deal which was finalised in June 2021, is battling high interest charges, a massive IT overhaul required to separate systems from former owner Walmart, and a shift into convenience stores which have added complexity to a formerly simple business model based solely on superstores. Small stores require a new set of products, often sold at different prices and with different delivery requirements.

Reports this year suggested there had been a rift between the brothers after the breakdown of Mohsin’s marriage, which was said to have “sent shockwaves” through the family. However, in March, Mohsin denied this, saying he and his brother “get on exceptionally well”.

Yet Zuber Issa has said he is selling his stake in Asda to TDR as part of a deal expected to finalise next month. Mohsin is stepping back from Asda to run what remains of their EG Group petrol forecourts business, with Rose taking up Asda’s reins alongside Rob Hattrell, an existing Asda director and a partner at TDR.

Once known as the cheapest UK supermarket, Asda has not only been undercut by Aldi and Lidl but has also moved away from a long-term pledge to be the price leader on fuel, with the RAC this summer naming Asda as, on average, the most expensive place to fill up.

One industry veteran who knows Asda well says the management effort and cost involved in opening dozens of small stores has diverted attention from the core outlets. “The truth is that prices are not that competitive and the quality is not there,” he says.

An Asda spokesperson said the shift into convenience stores was addressing “a longstanding structural disadvantage” for the group. They said it matched both Aldi and Lidl on key lines, adding that Asda “is consistently named the cheapest traditional supermarket in independent price comparison surveys”, such as those carried out by Which? and trade journal the Grocer.

However, suppliers say availability and range problems mean the amount of some fresh produce lines being sold is falling. “Volumes are going backwards at a rate of knots and no one is making decisions. They are absolutely rudderless,” one supplier source says.

Then there is the legacy of its debt-fuelled takeover. Finding funding to tackle the group’s issues has been hampered by servicing £8.5bn in net debt, including lease liabilities that have ballooned since the takeover, according to Armaveer Singh, a research analyst at CreditSights. Interest payments for this year are expected to be £470m, up from £360m last year and just £90m in 2021.

Asda says that its net debt, excluding lease liabilities, stands at £3.9bn and that total net leverage is three times underlying earnings – which exclude a variety of costs.

Underlying earnings, as well as debts, have been boosted by the acquisition of EG Group’s UK petrol forecourts arm in the past year. However, Singh says he expects the interest bill to rise to £500m next year, boosted by expected higher interest rates, as Asda has to refinance a £764m portion of its bonds between August 2025 and February 2027, beginning with £4m slice next summer and a £260m pile in February 2026.

With finances strained, Asda has pumped just 1.3% of sales into capital expenditure – such as new store fittings and refurbishment – since 2022, compared with an industry average of 2% to 2.5%. “This is slowly showing up in terms of the market share they are losing. They don’t have the capacity to refresh or renew stores as well as they should and customers do notice when they go in that it looks shabby,” Singh said.

An Asda spokesperson said: “On performance, we know there are areas where we need to do better, and we are investing an additional £30m in our stores during the remainder of this year to improve customer service and product availability.”

The IT switchover alone has required more than £800m of investment, leaving less cash to renovate stores and keep prices down. It has also inevitably meant glitches, including in the staff payment system and, more recently, in ordering systems, contributing to gaps on shelves and difficulties with suppliers.

Rose recently admitted the work may not be completed by a December deadline, potentially leading to additional payments to Walmart.

Meanwhile, workers say store standards have also been hit by staff cuts. Nadine Houghton at the GMB union, which represents thousands of Asda workers, says the supermarket has cut an estimated 8m staff hours across the business in recent years. While Asda has promised £30m of new investment in staffing and stores, that “won’t touch the sides of what they have already cut”, she said.

While Asda faces mounting challenges, management focus has been distracted by a string of high-level departures and arrivals since Mohsin took over the running of the business from the highly experienced supermarket executive Roger Burnley in August 2021. A string of 20-year Asda veterans have exited in recent months, including the commercial director for food, Paul Gillow, and the chief transformation officer, Mark Simpson.

Despite the supermarket touting a pay package worth as much as £10m, according to some reports, the group has been unable to find a chief executive, while industry insiders say more than one candidate has backed out at a late stage of negotiations, put off by fears of interference from Mohsin.

One supplier source said that while Mohsin was clearly dedicated and hard-working, “effectively they have had no chief executive for three years”. The source added: “Mohsin Issa has not got the experience. The difference in running petrol stations to a multiple retailer is like the difference between driving a motorboat to an oil tanker.”

A spokesperson for his EG Group petrol forecourts business said Mohsin had helped build “one of the largest and most entrepreneurial private companies in the UK”.

An Asda spokesperson said it was undertaking “an extensive international executive search to find a permanent chief executive to lead the business in its next phase of growth” and would update “in due course”.

It added: “The shareholder group has built a strong executive leadership team with key hires from across the industry including competitors recently and we look forward to welcoming previously announced hires over the coming months.”

Whoever takes on the job from Rose will have plenty of work to do. A reported £10m pay deal may not be enough.