Asda price guarantee 'threw rivals'

Asda highlighted further signs of sales momentum today as it claimed its price guarantee initiative had "ruffled" the feathers of rivals.

The UK's second biggest supermarket chain said like-for-like sales increased by 1.6% in the final quarter of 2010 after it revamped its own label ranges and introduced a guarantee in April that its prices would be cheaper than those of its rivals.

Since it improved its price guarantee in January by pledging to sell groceries at least 10% cheaper than its major rivals, the scheme had been used by 800,000 customers.

Asda's sales performance in the final quarter of 2010 was helped by a "good Christmas" for the group as it bounces back after six months of declining sales in the first and second quarters of its financial year.

Last year it relaunched its mid-tier own label range as Chosen By You and revamped its Extra Special premium range after chief executive Andy Clarke, who took over in May, admitted it had not focused enough on the quality of its food.

Asda today announced it would launch another 2,000 products under the Chosen By You range, bringing the total to 5,000, and said Extra Special was now the fastest growing premium range of its supermarket rivals.

The supermarket, which has 386 stores in the UK, does not announce profits figures but claimed they grew ahead of sales.

Asda also announced a new premium homeware brand today called Elegant Living, which was sourced with American parent company Walmart and will be 30% cheaper than its rivals.

Mr Clarke said he was "pleased with the progress we've made in the last six months".

He said: "The Asda Price Guarantee is a game changer - our customers are starting to use it more.

"The renewed focus on everyday low pricing underpinned by the Asda Price Guarantee has got our rivals a little ruffled.

"We have enhanced the quality of our products at no extra cost to our customers."

Asda was reprimanded for its original price guarantee adverts by the Advertising Standards Authority following complaints from rivals Morrisons and Tesco.

Morrisons and Tesco complained that the ads were misleading for suggesting that Asda was generally cheaper than themselves and Sainsbury's argued that there were significant exclusions from the price comparison.

Asda also warned that consumer confidence is facing a "perfect storm" because of rising prices and the Government's cutbacks.

Mr Clarke added: "People are very worried about things like unemployment and the change in the public sector jobs will start to generate a different level of confidence and job security is right up there in customers' minds. Confidence will become even more challenging this year."

He was confident that Asda would continue to be Britain's second biggest grocer and dismissed industry figures that showed its share of the grocery market was overtaken by Sainsbury's in December as "a blip".

Asda announced it will share out a £26.9 million bonus pool among its staff as it said full-year profits grew ahead of sales.

The performance contributed towards a 14% leap in full-year profits at Walmart, which reported net income of 16.4 billion US dollars (£10.1 billion), helped by a 27% surge in the fourth quarter.

Asda's performance compares well with its "big four" competitors over the Christmas season, with bigger rival Tesco reporting a sales rise of 0.6% including VAT in its six-week festive period.