Asda price pledge 'building base'
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But Asda, which operates 545 stores, said it was continuing to gain market share, and the slowdown is believed to be the result of lower price inflation and a tightening market as shoppers cut back on non-essential items. Asda's chief executive and president Andy Clarke said: "We have continued to increase our sales and grow ahead of the market through a combination of lowering more prices and driving even harder on product quality."
The retailer has invested £113 million in improving the quality of its food ranges in the past two years and this process is set to continue in September with the launch of a new range of 70 Extra Special ready meals. New dishes will include beef bourguignon and lamb shank with caramelised onion and port sauce.
Asda - which is owned by US giant Walmart, the world's biggest retailer - reported more strong online growth, with sales up 22% in the quarter.
Its resurgent performance in recent months has helped put Tesco under pressure, leading the UK's biggest supermarket chain to report its first profits warning for nearly 20 years as its Big Price Drop campaign failed to strike a chord with shoppers. However, Tesco has launched a fightback, which includes pumping £1 billion into the UK business, with extra staff, revamped stores and more special offers.
Kantar Worldpanel figures earlier this week suggested Asda's good performance has continued after its sales grew 6.2% in the 12 weeks to August 5, giving it a 17.4% share of the market, helped by taking on 147 Netto sites. Meanwhile, Tesco's market share fell slightly to 30.9%, but its sales growth of 3.4% was significantly higher than the 0.7% a month ago as it starts to close the gap on its rivals.
The results from Asda came as Walmart reported 4.5% revenue growth to 114.3 billion US dollars (£72.9 billion) in the quarter to July 31, although this was lower than the City had expected. Net income rose 5.7% to four billion US dollars (£2.6 billion).