Asda to launch £1bn price-cut plan

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Asda

Supermarket chain Asda is to launch a £1 billion price-cutting plan after sales growth slowed for the third successive quarter.

The Leeds-based retailer will target households squeezed by falling real wages as it locks horns with Sainsbury's in the battle to be Britain's second biggest supermarket.


It says its new strategy will help push it further below rivals Tesco, Sainsbury's, and Morrisons on price, while closing the gap with discounters such as Aldi and Lidl.

Asda, which is owned by US giant WalMart, announced the investment as its latest trading update showed like-for-like sales growth of just 0.3%.
The four big supermarkets have been battling over a dwindling middle market which continues to be gnawed away from high-end Waitrose sales and rapidly expanding budget grocers.

Now Asda appears to have set its sights firmly on shoring up its position at the cheaper end of the business.

Chief executive Andy Clarke said: "We regard ourselves as the UK's leading value retailer and it is against this backdrop that I have today set out our strategic priorities which will improve, extend and expand the business over the next five years."

Asda said: "The £1 billion price investment will enable the retailer to widen its price gap to the 'big three'.

"The investment will also close the price gap to the discounters."

The supermarket said, in addition to price-cutting, it would be ploughing £250 million into "product quality, style and design" and seeking to expand into London and the South East to increase physical access to the brand from 53% to 70% by 2018.

Its expansion would include more stores as well as the development of more than 1,000 Click and Collect locations.

Meanwhile, the supermarket aimed to grow online sales revenues to £3 billion in five years' time.

Latest figures from Kantar Worldpanel showed its market share in the 12 weeks to the middle of October fell to 17.2%, while Sainsbury's rose to 16.7%.

Sainsbury's 52-week figure was 16.8% while Asda's was 17.3%.

Asda grew like-for-like sales by 1.3% in the first quarter, slowing to 0.7% in the following period and dropping again to 0.3% for the latest three-month spell to the beginning of October.

The supermarket pointed out that it was the twelfth consecutive quarter of growth and Mr Clarke said he was pleased with the performance.

He said: "The market conditions are tough, competition is fierce and our customers' budgets are under intense pressure.

"We've continued to invest in lowering prices which has held them down for our customers while driving volume growth.

"This means we enter the crucial fourth quarter in a solid position."

Mr Clarke reiterated Asda's argument that despite the upturn in the broader economic picture, household finances were still being squeezed.

Initiatives such as Click and Collect sought to address the fact that many also have less time to spare.

He said: "Every day finances remain under pressure and our customers have less time.

"Consequently, they are changing the way they live, budget and shop, to adapt to this new economic reality."

Asda said its targeting of London and the South East was part of a plan to break into parts of the UK where market share was low but customer demand high.

It said its investments would be funded by an operational savings programme as well as increasing the way it takes advantage of the purchasing power held by the giant WalMart group.

© 2013 Press Association

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