Asda Hits Out at Rivals as Sales Slow

Date : 08/16/2012 @ 12:37PM
Source : Dow Jones News
Stock : Wal-Mart Stores, Inc. (WMT)
Quote : 76.15  0.13 (0.17%) @ 3:59PM

Asda Hits Out at Rivals as Sales Slow

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By Peter Evans

LONDON--Wal-Mart Stores Inc.'s (WMT) U.K. arm Asda Group Ltd. Thursday criticized its supermarket rivals for relying too heavily on promotional deals to "buy sales," as it posted a slowdown in sales growth in the second quarter.

Chief Executive Andy Clarke conceded it was "still a very tough environment for customers," but said Asda would continue to outperform the market by focusing on price and quality.

Asda, the U.K.'s No. 2 supermarket after Tesco PLC (TSCO.LN), reported a 0.7% increase in same-store sales excluding fuel and value-added tax in the 13 weeks to June 30, down from 2.2% in the previous quarter and equating to a 1.5% rise in first-half sales. The second-quarter figure marks a slight acceleration from the 0.5% rise a year earlier.

Despite showing a slowdown from the first quarter, the increase is likely to put it ahead of its most of its U.K. rivals, which analysts expect to report flat to negative growth as first-half results are announced in the coming weeks.

"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," Mr. Clarke said.

Finance Director Rob McWilliam said Asda wouldn't follow its peers by offering discount vouchers or wall-to-wall sales promotions as a means of attracting one-off customers.

"Vouchers and promotional gimmicks are often used [by our competitors] to disguise weak price propositions," Mr. McWilliam told reporters.

With more than 500 stores in the U.K., Asda represents Wal-Mart's largest market by sales outside of the U.S. Its "Every Day Low Prices" slogan has struck a chord with cash-strapped consumers during the economic downturn, leading to steady increases in market share over the past year.

Latest data from Kantar, which monitors the grocery purchasing habits of U.K. households, showed Asda boosted its share of the U.K. market to 17.4% from 17.0% a year earlier in the 12 weeks to Aug. 5, above nearest rival J. Sainsbury PLC (SBRY.LN) at 16.5%.

"It is Asda's strong value credentials which continue to underpin its current outperformance," said Joseph Robinson at retail analysts Conlumino.

Official data released Thursday showed U.K. retail sales volumes rose 0.3% in July from June, despite feedback from retailers suggesting the Olympic Games had no impact on trade.

Write to Peter Evans at peter.evans@dowjones.com

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