Asda fights back against rivals in 'tough' grocery market

Asda, the UK's second-biggest supermarket, appears to be fighting back against the market leader, Tesco, with an improved performance in the converted Netto stores it has acquired.

The closely watched industry data from Kantar Worldpanel initially seems to make grim reading for Andy Clarke, the chief executive of Asda, as it points to the Walmart-owned grocer losing sales to its rivals over the last 12 weeks.

This comes at a time when Asda's low-price message should be resonating with consumers. Evolution Securities has described trading conditions in the grocery sector as the "worst" for three decades. Asda's market share slipped again, from 17.5 per cent to 17 per cent, over the 12 weeks to 10 July, according to Kantar. Its sales growth of just 1.9 per cent, compares with 5.6 per cent at Morrisons, 4.4 per cent at Sainsbury's and 4.3 per cent at Tesco.

Clive Black, the analyst at Shore Capital, said: "Asda is finding life tough and has for six months."

However, according to Kantar data seen by The Independent, the picture is markedly different over the last four weeks to 10 July, which suggests that Tesco has become the laggard of the big four. Over the shorter period, Asda's sales have jumped to 3.3 per cent, Sainsbury's are at 3.5 per cent, Morrisons at 4.3 per cent and Tesco's down to 1.7 per cent. This recent improvement at Asda appears to be coming from the conversion to its own branding and offer at 42 of the 147 Netto stores it acquired the UK arm of the Danish discounter for £778m last year.

Asda said: "We continue to be pleased with our performance on a like-for-like basis. We're also beginning to see the start of the benefit that will flow in full during the second half, from the conversion of our Netto stores."

However, given the falling sales volumes in the sector – when the impact of inflation is stripped out – Shore Capital has scaled back its profit forecast for the three listed grocers, Tesco, Morrisons and Sainsbury's. Mr Black is most concerned for Sainsbury's, which he had downgraded by 7 per cent to £669m for 2011-12. He said: "The shortfall in industry sales has the biggest impact on Sainsbury's because they have the lowest [operating] margin."

Over the 12 weeks, Aldi and Lidl were the top performers, growing sales by 20.2 per cent and 15.6 per cent, respectively. Waitrose also continued to grow ahead of the market, which was up by 4.6 per cent, with a jump of 9 per cent.