Asda boss gloomy on consumer spending this year

Asda's chief executive admitted he was "nervous" about the outlook for consumer spending this year, but said the UK's second-biggest supermarket would still accelerate the opening of smaller Asda groceries and non-food stores over the next five years.

Andy Bond said British families faced a raft of rising costs in 2010 which they did not come up against last year. "Petrol is going up, VAT has increased and for some people taxation is increasing and some household staples are still in inflation," he explained. "There is no good news to make people feel good so I think sentiment is dropping. I am really quite nervous for this year for consumers."

His warning came as Asda said that its underlying sales, excluding fuel, had risen by 4.6 per cent in the three months to 31 January. This was slower than the 5.6 per cent growth in its third quarter, although falling food price inflation hit all supermarkets' sales.

The most recent industry data for the 12 weeks to the 24 January showed that Asda, with 4.3 per cent growth, had slipped behind Tesco's 5.5 per cent, Sainsbury's 6.8 per cent and Morrisons' 10.6 per cent, according to Kantar Worldpanel.

But Mr Bond said the heavy snow which fell in December and early January had taken a bigger toll on Asda because it has fewer shops and therefore customers have to drive further to reach them.

Asda plans to open at least nine new stores this year and extend 10 others, but Mr Bond said a key focus going forward were its smaller format shops, which have as little as 8,000 square feet of floor space. These would give Asda "more opportunities" to grow, he said. It has only 21 stores of less than 25,000 sq ft.

The grocer will also open more of its Asda Living shops, which do not sell food, over the next five years. It has 24 at present but only one more is planned so far this year. Asda declined to comment on a report by JPMorgan this week which said it planned to open 100 smaller supermarkets over the next five years and 150 Asda Living shops.

Mr Bond denied Asda had become "boring and one-dimensional", which JP Morgan claimed its management had said at a supplier event last week.