Asda to switch focus to low-price campaign

The Leeds-based group has decided to ditch promotional offers and focus on its Every Day Low Pricing campaign instead.

"In hindsight we should have been less promotional in the second half of 2009," said Asda's chief executive Andy Bond. "Asda will return with force to our Every Day Low Prices model in 2010. That's what our customers need this year."

He added that shoppers are becoming increasingly sceptical about the value of promotional offers and would rather stick with low prices throughout the year.

The move was welcomed by analysts who believe it is a sensible plan at a time when customers are increasingly worried about losing their jobs.

"Our belief is that in times of economic stress, consumers prefer lower prices than promotions," said analyst Dave McCarthy at Evolution. "Multi-buys tie up consumers' cash flow and force over-stocking in the larder at home."

Asda, which is owned by US retail giant Wal-Mart, also announced plans to open more smaller stores of under 25,000 sq ft each.

Despite the smaller size, shoppers will still be able to do a full weekly shop and the price will be the same as its bigger supermarkets.

Mr Bond refused to be drawn on how many smaller stores Asda plans to open, but JP Morgan analysts said the group could open 100 smaller stores in the next three to five years, as well as 150 Asda Living stores.

Asda has already created a separate division for 21 of its shops that are under 25,000 square feet. The group said it will open at least ten new stores in 2010 including seven larger supermarkets and three smaller stores.

Asda reported a six per cent rise in like-for-like sales in 2009, but the group's stores suffered during the snowy weather and like-for-like sales growth slipped to 4.6 per cent in the final quarter.

Tesco reported a 4.9 per cent rise in underlying UK sales for the six weeks to January 9, while Sainsbury's delivered a 4.2 per cent increase for the 13 weeks to January 2 and Bradford-based Morrisons saw a 6.5 per cent rise for the six weeks to January 3.

"We had four weeks of disruption from mid December onwards," said Mr Bond. "We were hit by the snow more than our rivals as we have fewer stores so customers have to drive further to get to us."

Many customers made journeys on foot to their nearest local store during the snow.

The group is to launch an ambitious cost-cutting programme this year as part of Wal-Mart's global plans to reduce outgoings.

Asda's fresh produce business Castleford-based International Produce Limited will play a key role in reducing prices on imported products such as melons, fruit with stones and grapes.

International Produce Limited, which is now part of Wal-Mart, operates from two UK sites in Normanton and Sittingbourne.

Asda said it was too early to quantify the savings it expects from Wal-Mart's efforts to improve its supply chain.

Mr Bond said Asda's online business was profitable and the chain has no plans to follow its rivals and introduce a loyalty card.

In addition to its smaller stores, Asda plans to open more general merchandise Asda Living stores and capture market share online.

The group said it will create 6,000 new jobs in 2010.

Staff share in bonus bonanza

Asda is to reward staff with a record 26m bonus pot with employees receiving up to 438 each depending on how well their store has performed.

The group said a successful year's trading in 2009 meant the bonus pot had risen by 18 per cent on the previous year.

All staff who have worked for six months or longer will get a share.

The average payment is 278. Staff can earn between 20 per cent and 120 per cent of their bonus entitlement depending on how well their store performed against its target.