UPDATE 2-Asda to open smaller stores as sales growth slows

* Q4 like-for-like sales ex-fuel up 4.6 pct

* Says was too focused on promotions in 2009

* To open 10 stores, extend 10, creating 6,000 jobs in 2010

* To open smaller stores, more non-food stores, cut costs

(Adds more CEO comments, detail, background)

By Mark Potter

LONDON, Feb 18 (BestGrowthStock) – Asda, Britain’s No.2 grocer, said
it would expand into smaller format stores, open more non-food
shops and cut costs to drive growth in tough markets after
posting its lowest quarterly sales growth in about two years.

Chief Executive Andy Bond said on Thursday the chain, owned
by U.S. group Wal-Mart Stores Inc (WMT.N: ), became too focused on
promotions in 2009, which clouded its low-price message.

“While we allowed ourselves to be too promotional in 2009,
be in no doubt that Asda will return with force to our Every Day
Low Prices model in 2010,” Bond said in a statement.

“That’s what our customers need this year,” he added, saying
the prospect of rising taxes and public sector job cuts could
make for an “extremely tough” year for shoppers.

Asda, which runs 371 supermarkets and 24 non-food Asda
Living stores, said sales, excluding petrol, at stores open at
least a year rose 4.6 percent in the fourth quarter of 2009.

That was down from 5.6 percent in the previous quarter and
is probably the slowest growth rate since the third quarter of
2007 when the chain — which at the time did not publish precise
figures — said sales rose by a “low single digit” percentage.

Data from researchers Kantar Worldpanel earlier this month
showed Asda losing share to its main rivals, including industry
leader Tesco (TSCO.L: ) and smaller chains J Sainsbury (SBRY.L: )
and Wm Morrison Supermarkets (MRW.L: ). [ID:nLDE61129T]

However, that was partly due to bad weather, which hit Asda
more than rivals because it tends to operate big stores on the
edge of towns and does not also run smaller, convenience stores.

SMALLER STORES

Tesco reported a 4.9 percent rise in underlying UK sales for
the six weeks to Jan. 9, while Sainsbury delivered a 4.2 percent
increase for the 13 weeks to Jan. 2 and Morrison a 6.5 percent
rise for the six weeks to Jan. 3.

Wal-Mart’s Frankfurt-listed shares were down 1.3 percent at
39 euros at 1322 GMT.

Bond said Asda planned to accelerate growth in smaller
format stores and had created a separate division for 21 of its
shops that are under 25,000 square feet.

It also plans to open more general merchandise Asda Living
stores and capture market share online, as well as bearing down
on costs as part of Wal-Mart’s drive to buy more products at a
group level, as well as directly from producers.

In total, Asda plans to open 10 stores, including three
smaller shops, and extend 10 others in 2010, creating around
6,000 jobs, it said.

Asda did not quantify the savings it expected from
Wal-Mart’s efforts to improve its supply chain.

Wal-Mart reported a higher quarterly profit on Thursday, but
said sales at its existing U.S. namesake stores fell during the
holiday quarter and forecast earnings for the current quarter
that could miss analysts’ estimates. [ID:nN16220499]

Stock Market Report

UPDATE 2-Asda to open smaller stores as sales growth slows