Asda to cut prices further with £1bn investment as it outlines five year strategy

As part of the five-year strategy, developed in partnership with consultancy McKinsey, the supermarket plans to invest £1bn in lowering prices to widen the gap with rival food retailers while closing the gap with the discounters, such as Aldi and Lidl, who are rapidly growing market share.

Another £250m will be invested in improving quality, design and style across its products to build on its work across ranges Chosen By You and Extra Special and its meat and fish offers.

Asda also wants to extend its UK coverage by opening more stores across London and the South East where market share is low but customer demand is high. Asda is wants to increase the number of customers it can reach in the UK from 53% to 70% by 2018 and grow the number of click-and-collect locations from 218 to 1,000.

Chief executive Andy Clarke has also turned on the green light on convenience stores. Retail Week revealed earlier this month Asda will test its small store model through 100 petrol stations and will look to launch a convenience chain towards the end of its five-year plan.

In addition, Asda is targeting online sales growth to £3bn by 2018 from £1bn now.

Asda chief executive and president Andy Clarke said: “We recognised some time ago that no matter whether the macro economy is slowly improving, every day finances remain under pressure and our customers have less time. Consequently, they are changing the way they live, budget and shop, to adapt to this new economic reality.

“We regard ourselves as the UK’s leading value retailer and it is against this backdrop that I have today set out our strategic priorities which will improve, extend and expand the business over the next five years.  There are three major components to this approach which will redefine value.”

Asda said the investments will be funded by the savings generated by Asda’s internal “We Operate For Less” programme, and through leveraging the power of its parent firm US grocery giant Walmart.

The new plans came as the supermarket revealed like-for-like sales edged up 0.3% in its third quarter to October 4, recording its twelfth quarter of consecutive growth but a slowdown from 0.7% growth in the second quarter.

Clarke said he was “pleased” with the performance in the “tough” market conditions. “Competition is fierce and our customers’ budgets are under intense pressure,” he added. “We’ve continued to invest in lowering prices which has held them down for our customers while driving volume growth. This means we enter the crucial fourth quarter in a solid position.”

Chief financial officer Richard Mayfield said rivals’ vouchers and Asda’s northern bias eaten into the retailer’s market share as northern shoppers face harsher economic conditions.