Asda is closing the price gap on the discounters

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Asda, the ​UK’s second biggest grocer after Tesco, beat its main rivals with a modest rise in underlying sales and said it is narrowing the price gap with the discounters.

The Leeds-based firm reported a 0.5 per​ ​cent rise in like-for-like sales​ ​in the 10 weeks to June 30 in a tough grocery market ​which is suffering its slowest growth in a decade.​ ​

The ​result is an improvement on its first quarter​ ​performance when like-for-like sales rose 0.1 per ​cent.​ Asda is outperforming arch rivals Tesco and Bradford-based Morrisons which have both issued profit warnings following a decline in underlying sales.​

Asda’s chief executive Andy Clarke said the price differential between Asda and German discounters Aldi and Lidl is now narrower than it has ever been.

“According to (industry trade magazine) The Grocer, two weeks ago our price basket was lower than the discounters,” he said.

“We’ve halved the price differential with the discounters. We don’t have parity yet.”

Asked if Asda will ever achieve parity, Asda’s chief financial officer Alex Russo said: “The price difference is as narrow as it’s ever been. We have had a long-term plan to narrow it. The plan is to be consistent.”

Mr Clarke added that the discounters only offer around 2,000 products, compared with Asda’s 20,000.

“The long game is our format will win,” he said. “We will narrow the gap with the discounters and broaden it with the supermarkets.”

Under Asda’s Price Guarantee, the group promises to be 10 per cent cheaper than its main supermarket rivals or customers get their money back.

Asda was the first of the big four retailers to counter the threat of the discounters by cutting its own prices.

Last November it promised to spend £1bn on lowering prices over the next five years.

Subsequently, Tesco and Morrisons have pledged to cut prices while Sainsbury’s has said it will remain competitive.

Mr Clarke said rivals are only now catching up with its approach of moving away from gimmicks such as vouchers in order to focus on “every day low prices”.

Asda’s clothing brand George is now the second largest clothing retailer by volume, boosted by the popularity of its low-priced school uniform.

Mr Clarke said he expects the economy to remain challenging with a “two-stage recovery” depending on where people live in the UK.

“It feels very different if you are in London to Northern Ireland and the North East,” he said.

“If you are a family on a budget in those difficult regions it still feels very challenging.

“There is undoubtedly a two=stage recovery which is why our strategy is working.”

Online grocery sales grew more than 20 per cent, with click and collect now representing 10 per cent of internet sales.

There are now more than 400 click-and-collect sites throughout the country ranging from lockers to Transport for London sites.

The long-term plan is to expand this to 1,000 sites, with nearly 300 now offering same-day collection.