Asda to spend £1bn on price cuts and £250m on innovation

Asda hopes to open more supermarkets in the South East of England and hundreds of standalone “click and collect” locations for shoppers ordering goods on the internet. The retail chain, which is owned by Wal-Mart, America’s biggest company, revealed yesterday that like-for-like sales edged up by 0.3 per cent in the third quarter.

Its US parent reported global profits of $3.7 billion for the three months to October, an increase on last year’s $3.6.billion, although it trimmed forecasts for the full year because of tough competition from discount “dollar shops” on American high streets.

Asda has pledged to make £1 billion of price cuts and spend £250 million on product innovation to fend off competition from J Sainsbury, which has snatched second place in the league table of food retailing. Andy Clarke, the chief executive, said: “Market conditions are tough, competition is fierce and our customers’ budgets are under intense pressure.”

Traditionally, Asda’s strength has been in the North of England. The company said it had “set its sights on breaking into parts of the UK where its market share is low but where customer demand is high, with a particular emphasis on London and the South East.”

In addition to boosting its 573-strong chain of stores, it intends to open more standalone filling stations and raise the number of “click and collect” points, where customers can pick up online orders, from 218 to 1,000 over five years.

While Tesco and Sainsbury’s have been squabbling over price-matching promises, Asda has concentrated on battling with Lidl and Aldi for thriftier shoppers under a new slogan, “You’re better off at Asda”.

The Leeds-based supermarket chain is expected to reveal detailed plans for a “store of the future” soon, intended as a response to Tesco’s big box initiatives that incorporate coffee shops and Giraffe family restaurants.

Greg Bromley, a retail consultant at Conlumino, said: “Asda’s commitment to investments into its core grocery offer, alongside convenience and multichannel, will put it in a strong position going forward. However, the retailer is facing increased pressure from both Tesco and Sainsbury’s, and from the discounters, especially on price.”

Wal-Mart’s global revenue rose by 1.6.per cent to $115 billion in the third quarter. Mike Duke, chief executive, said: “The retail environment, in stores and online, remains competitive.”

Source : Andrew Clark, Susan Thompson - The Times
www.thetimes.co.uk