Food sales bolster Asda success story

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Asda, the Wal-Mart-owned retailer battling for control of Safeway, rubbed salt in Sainsbury's wounds yesterday by reporting a strong rise in underlying sales.

Asda, the Wal-Mart-owned retailer battling for control of Safeway, rubbed salt in Sainsbury's wounds yesterday by reporting a strong rise in underlying sales.

The group, which overtook Sainsbury's to become the country's second largest supermarket last month, said food sales had been "strong", growing by high single digits at comparable stores in its second quarter. Underlying sales, including higher-margin non-food lines, also grew by high single digits.

Mark Hughes, a food analyst at Numis Securities, said: "Everyday low pricing is working very, very well for Asda and others like Tesco and William Morrison. Doing well on the non-food side also gives them an edge."

News of strong trading at Asda came as its parent posted a 20 per cent jump in profits to $2.44bn (£1.52bn) for the three months to end-July. Although the Bentonville-based group does not break out Asda's contribution, it said operating profits at its international businesses grew by 19 per cent. Asda "exceeded" its profit plan for the quarter and year to day, it added.

Asda said its George clothing range had strengthened its position as the country's number two clothing retailer by volume behind Marks & Spencer, maintaining double digit growth in the quarter. It plans to trial two standalone George formats in Croydon and Leeds this autumn.

Asda's hopes of beating Tesco, Sainsbury's and Morrison to acquire Safeway were boosted this week after the Competition Commission delayed its submission to the Department of Trade and Industry by six days to consider a new Asda proposal. However, most experts expect the Government to block all bidders bar Morrison. A fifth potential bid for Safeway from Philip Green, the BHS and Arcadia owner, was not part of the commission's inquiry.

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