UPDATE 3-Asda aims to be UK No.1 in non-food in five years

* Aiming for 150 Asda Living stores within five years

* Aiming for 100 smaller format supermarkets within 5 years

* Firm plays down talk of M&A deal in non-food – source

* To cut prices and costs to address recent undperformance

(Adds Asda, Wal-Mart comments)

By Mark Potter

LONDON, April 15 (BestGrowthStock) – British grocer Asda has set its
sights on overtaking rival Tesco Plc (TSCO.L: ) to become the
country’s biggest non-food retailer within five years, helped by
a rapid expansion of its standalone Asda Living stores.

Asda, which is owned by U.S. retail giant Wal-Mart Stores
Inc (WMT.N: ) and is looking for a new chief executive, also said
on Thursday it would step up expansion of smaller format stores
to boost its position as number two grocery chain behind Tesco.

Britain’s supermarkets are expanding rapidly into higher
margin non-food markets and outpacing growth at specialist
retailers as recession-hit shoppers focus on the lowest prices.

Grocery specialist IGD estimates sales of non-food items at
UK grocers rose 6.4 percent to 11.6 billion pounds ($18 billion)
in 2009, compared with a 0.8 percent fall at other retailers,
and forecasts strong growth for the years ahead. [ID:nGEE5AN2G5]

In a webcast of a briefing to analysts, Asda said it was
cautious about the economic outlook and admitted its recent
sales performance, which has lagged its main rivals, has not
been up to its previous standards.

Wal-Mart chief financial officer Tom Schoewe denied that a
surprise announcement on Monday, in which Asda chief executive
Andy Bond said he would move to become part-time chairman of the
chain, was linked to the underperformance. [ID:nLDE63B166]

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

Asda said it would cut prices, funded by cost savings as
Wal-Mart moves to buy more goods centrally, to revive growth.

The chain, which has 374 stores, also said it aimed to have
around 150 standalone non-food Asda Living stores open in around
five years time, up from 24 currently.

A source at the analyst event told Reuters the firm played
down speculation it might make an acquisition to boost its
presence in general merchandise markets.

Some analysts have suggested Asda might look at buying
Britain’s Home Retail (HOME.L: ), the owner of catalogue-based
Argos stores and the Homebase do-it-yourself chain.

The source said Asda saw plenty of opportunity to snap up
individual sites following a recession which drove out-of-town
chains like furniture retail MFI out of business.

Asda has remodelled its Asda Living stores in recent months
to appeal beyond its traditional discount customers, with new
cafes and a focus on its popular George clothing range.

It also has high hopes for its online shopping businesses in
both food and non-food.

Tesco, which reports annual results on Tuesday, is expanding
rapidly in non-food markets as well, while smaller rival J
Sainsbury (SBRY.L: ) has said it aims to double its sales of
non-food goods over five years. [ID:nLDE62P1YW]

Neither Tesco nor Sainsbury have standalone non-food stores.

Asda said it planned to have around 100 smaller format
supermarkets within five years, up from 22 currently.

It also said it would make an unspecified amount of savings
from Wal-Mart’s plan to buy more goods centrally.

More than 40 percent of Asda’s home and leisure goods will
be sourced directly from manufacturers by 2013, up from 22
percent in 2009, it said.

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(Editing by James Davey and David Cowell)
($1=.6444 Pound)

UPDATE 3-Asda aims to be UK No.1 in non-food in five years