Asda is cooling on hypermarkets as festive sales tick up

Andy Clarke, the chief executive of Asda, has become the latest grocery boss to signal the days of building huge out-of-town hypermarkets packed with non-food could be drawing to a close.

He made his comments yesterday as the Walmart-owned grocer posted a slowdown in its underlying sales growth over the Christmas quarter.

Mr Clarke said that "acquiring large space is ever more difficult", not just as big stores are harder to find and acquire but also due to "planning constraints".

Asda plans to open 25 stores this year, with a focus on stores sized between 3,000 square feet and 80,000 sq ft. The bulk of its 541 stores are about 40,000 sq ft.

Asda's comments follow those of Tesco's chief executive, Philip Clarke, who, alongside its first profits warning in 20 years last month, in effect put the brakes on it building big hypermarkets, as people increasingly shop online or baulk at driving to stores on the edge of towns.

Concerns have been raised about the grocery "space race" and lower returns on new shops. The big four UK grocers plan to grow space by 19m sq ft, or 21 per cent, between 2011 and 2015, with sales volumes set to rise by just 2.3 per cent.

An Asda spokesman said: "The requirement to have those big out-of-town stores is somewhat negated by the ability to order online and have it delivered to your local shop."

He said the grocer had "no plans" to open any supercentres sized between 80,000 sq ft and 120,000 sq ft this year. But he said: "If the right location became available at the right price I'm sure we'd be interested." Asda has 32 supercentres but the last one it opened was in Ellesmere Port in August 2006.

Mr Clarke said Asda was the "clear winner at Christmas". It was boosted by a focus on lower prices, the 147 Netto stores it has converted, revamped own-label ranges and online sales up nearly 20 per cent in the quarter. Asda grew sales, excluding fuel and VAT, by 1 per cent in the 14 weeks to 7 January but by just 0.1 per cent in the final three months of 2011. This compared with growth of 1.3 per cent in the previous quarter.

Mr Clarke said: "In the autumn, customers were tempted by competitors' promises on price," interpreted to mean Tesco's Big Price Drop, but they returned to Asda in November and December.

According to Kantar Worldpanel, Asda delivered sales up by 8.2 per cent for the 12 weeks to 22 January. This compares with a 5 per cent rise at Sainsbury's, Morrisons' 3.7 per cent growth and just 2.1 per cent at Tesco.

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