Like-for-like sales could fall by as much as 7 per cent at a time when arch rivals Tesco, Sainsbury's and Morrisons are reporting improving underlying sales.
The news will put further pressure on CEO Andy Clarke who is focusing on profits rather than sales. He has insisted that “every day low prices” are the best method and has criticised Bradford-based Morrisons for slashing alcohol prices before Christmas.
Leeds-based Asda usually comes top out of the big four in terms of basket prices, but shoppers on a budget can get goods for around 10 per cent less at Aldi and Lidl.
According to Kantar Worldpanel data earlier this month, Asda was the worst performer of the big four with a 5.1 per cent decline in sales in the three months to April 24. Typically Asda's own figures are one or two per cent worse than Kantar Worldpanel data suggests.
Kantar Worldpanel said Morrisons was the second worst performer with sales down 2.6 per cent, but this reflects the closure of unprofitable stores rather than underlying sales, which are improving.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said there are signs that Morrisons’ recovery is gaining pace as it suffered the smallest market share loss, down from a share of 10.9 per cent in 2015 to 10.6 per cent. Asda’s share fell from 16.9 per cent to 16.0 per cent.
The big four, which include market leader Tesco and number two player Sainsbury’s, are all losing sales to German discounters Aldi and Lidl.
Lidl is now Britain’s fastest growing supermarket with sales up 15.4 per cent, while sales at bigger rival Aldi rose 12.5 per cent.
Asda’s sales fall will continue a long spell of weaker trading.
“Asda are losing customers at quite a rate,” said Mr McKevitt.
“The winds are against them. People are shopping less in bigger stores and Asda is mainly bigger stores. Their share has come down quite sharply as they used to be the number two player.
“They need to do something to stabilise and get back on track. Maybe they need to enter a new kind of channel.”
Mr Clarke is expected to step down next year and hand over the reins to Roger Burnley, who is on gardening leave after quitting Sainsbury's. Mr Burnley will not be allowed to join Asda until October.