Asda's five-year plan to overtake rival Tesco

The Leeds-based company hopes to achieve its goal by opening another 125 Asda Living stores, which sell George clothing, health and beauty products, electrical goods, furniture, homewares, mobile phones, CDs and DVDs.

This would bring the total number of Asda Living stores to 150 standalone sites.

It also hopes to pull well ahead of number three player Sainsbury's with the opening of 100 smaller Asda supermarkets, which will range from 8,500 to 25,000 sq ft. This is about quarter or half the size of a normal Asda store.

The group's plans were outlined to US analysts and investors at a briefing in Leeds yesterday. Asda's US parent retail giant Wal-Mart is keen to expand the business and cash in on the growing trend for people to buy clothing, DVDs and other non-food goods from supermarkets.

The presentation was given by outgoing chief executive Andy Bond, who is to take on a three-day a week chairmanship role once a new chief executive is appointed.

Asda also told analysts that it is cautious about the economic outlook and said its recent sales performance, which has lagged its main rivals, has not been up to its previous high standards.

Mr Bond said the group had "more work to do" after tough recent trading.

Asda's year on year sales growth of 2.7 per cent in March was behind its big rivals Tesco, Sainsbury's and Bradford-based Morrisons.

Asda said that easing food inflation has depressed sales growth, while consumer confidence is fragile and the cost of living the primary concern.

Wal-Mart's chief financial officer Tom Schoewe denied that Monday's surprise announcement that Mr Bond was stepping down was linked to the underperformance.

Mr Bond said the decision was his own and that if his new role worked well for everyone he would be "around a long time".

Analysts said that the ambition to leapfrog Tesco and become the number one in non-food would involve the group doubling its non-food sales in five years.

This led to speculation that an acquisition is inevitable. Recent reports have suggested that Asda might buy Argos and Homebase owner Home Retail Group.

But an Asda insider played down rumours that the group will make an acquisition, saying that it can expand organically and cash in on the demise of retailers such as Woolworths and MFI by buying up individual sites.

Asda Living stores are around 28,000 sq ft in size and sell over 23,000 products. They have been revamped over the past year to attract wealthier customers.

Asda small stores are aimed at shoppers living in smaller towns and suburban areas. The average size is 17,000 sq ft, with 24,000 products in store. The group has 25 small stores at the moment.

"Our small stores are proving popular with customers," said Mr Bond. "They can complete a full weekly shop while still taking advantage of our market leading low prices." Unlike some rivals, Asda has kept prices in smaller stores as low as prices in its big stores.

Asda's long term plan is to cut prices further, funded by cost savings as Wal-Mart moves to buy more goods centrally.

More than 40 per cent of Asda's home and leisure goods will be sourced directly from manufacturers by 2013, up from 22 per cent in 2009.

Grocery specialist IGD estimates sales of non-food items at UK grocers rose 6.4 per cent to 11.6bn in 2009 and forecasts strong growth for the years ahead.