Asda Sales Growth Strengthens as U.K. Grocer Tackles Discounters

Asda, the U.K. supermarket chain owned by Wal-Mart Stores Inc., reported strengthening quarterly sales growth as price cuts helped it keep its share of a grocery market shifting relentlessly toward discounters.

Sales at stores open at least a year rose 0.5 percent, excluding fuel and value-added tax, in the 10 weeks ended June 30, the Leeds, England-based company said in a statement today. That compares with 0.1 percent growth in the prior quarter.

Asda, Britain’s second-largest grocer behind Tesco Plc, is holding its own in the fight against German budget chains Aldi and Lidl, which are recording record growth rates, putting Britain’s traditional supermarkets under pressure. Asda held its market share at 17 percent and increased sales in the 12 weeks to July 20, while Tesco recorded the biggest revenue drop in two decades, according to Kantar Worldpanel data.

The economic outlook remains “challenging,” Asda Chief Executive Officer Andy Clarke said at a press briefing today, adding that the chain’s focus on value is working.

Asda was the first U.K. supermarket to announce price cuts to take on the discounters when it said in November it would spend 1.25 billion pounds ($2.1 billion) on price and quality improvements.

Britain has become more polarized in its shopping habits toward bargain and upscale stores. Aldi, Lidl and the upmarket Waitrose chain gained almost 2 percentage points of market share over the past year, and now account for a combined 13.3 percent of the U.K. grocery market, the Kantar figures showed.

“The last quarter has seen unprecedented change within the food retail sector, and whilst I do not underestimate the challenge currently presenting retailers, I am proud that our business identified and put plans in place to respond to these changes early,” Clarke said at the briefing.

Parent company Wal-Mart today reported stagnant same-store sales growth and cut its earnings forecast for the year, with the Bentonville, Arkansas-based company citing higher health-care costs and slow traffic at its supercenters.

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