The Leeds-based firm said underlying sales fell 1.3 per cent in the three months to December 31. Its clothing arm was hit by a reluctance among shoppers to spend amid the political turmoil that hit the retail sector ahead of the December General Election.
Despite this, the core food business proved more stable and Asda reported progress in its strategy of winning on price, delivering an easy shopping experience and growth "where customers care".
Asda CEO and president Roger Burnley said: “We continued to improve our price position versus the previous quarter, and year on year, whilst our trusted combination of great value and quality ranges with a touch of Asda personality resonated strongly with customers."
Asda has seen strong growth in its premium Extra Special range as shoppers treated themselves at home rather than venturing out to restaurants.
Mr Burnley said: “Extra Special sales in the quarter grew ahead of the market and up 5 per cent year on year.
"We were delighted to receive 92 Quality Food and Drink Awards in the quarter, including the prestigious retailer of the year, whilst also retaining our value credentials with the Grocer 33 best value Christmas basket for the seventh year in a row."
Asda's home shopping operation saw double-digit growth in the fourth quarter – up 10.3 per cent year on year.
"During the quarter we rolled out Same Day Delivery to 284 stores and trialled a ‘one hour Click and Collect’ service in two shops," said Mr Burnley.
"Following positive customer feedback, this service is being extended across the chain from today – helping our customers save even more time in their busy lives."
Asda said many customers were careful with their Christmas spending.
“We know that our customers mind sets during the quarter were cautious and whilst customers were enthusiastic for Christmas, they were more mindful in their spending – with many choosing to pare back gift lists and focus presents on kids rather than adults and extended family," said Mr Burnley.
"Our monthly Income Tracker showed that whilst disposable income remained stable at around £217 a week during the fourth quarter, previously seen trends of growth are starting to slow and consumers remain highly budget conscious."