Asda sales remain under pressure

Supermarket chain Asda posted another fall in sales today as it continues to grapple with testing conditions for the industry.

The UK's second biggest grocer saw like-for-like sales drop 0.4% in the second quarter of the year, as falling food price inflation hammered sales across the supermarket sector.

Asda, which is owned by US giant Wal-Mart, has had a tough start to the year after suffering its first sales fall for four years, of 0.3%, in the first quarter.

Wal-Mart International president and chief executive Doug McMillon warned trading conditions were likely to remain tough.

He said: "Asda's customers are facing recently announced tax increases and cuts in government spending. These are likely to cause our UK customers to face a challenging 12 to 18 months."

Mr McMillon added that Asda's total sales grew in the low single digits and the firm "continued to make good progress towards its strategic goals". The group did not provide a net profit figure.

The group said its clothing range George had a particularly strong quarter, with strong sales of World Cup related merchandise.

Earlier this year, the group's recently appointed chief executive Andy Clarke announced a major deal to snap up the UK arm of discount retailer Netto.

The £778 million takeover will add another 193 stores to its estate, all of which will be renamed under the Asda brand.

The Netto acquisition will boost its smaller format portfolio and help it become a stronger competitor to market leader Tesco.

The group said the acquisition is subject to regulatory approval and is expected to close later this year.

Mr Clarke is under pressure to revive Asda's fortunes, after it saw a fall in its market share in recent months, down to 16.8% in the 12 weeks to July 11, from 17% a year earlier.

Asda's second dedicated home shopping centre will open next week in Enfield. Mr McMillon said it will "provide enhanced coverage in an area of low market share for Asda".

The group is working on a five-year strategy to secure its position as the number two in food and leader in non-food sales, with plans to accelerate openings of smaller stores and launch more Living general merchandise outlets.

Asda makes up 31% of Wal-Mart International's sales, while Wal-Mart International accounts for 25% of Wal-Mart's total revenues.

Today, Wal-Mart said Wal-Mart International continued to drive growth for the company after net sales rose 11% to 26 billion US dollars (£16.6 billion), helped by strong contributions from Brazil, China and Mexico.

Wal-Mart as a whole posted net sales for the second quarter of 103 billion US dollars (£65.8 billion), an increase of 2.8% from 100 billion US dollars (£63.9 billion) in the same period last year.