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April 15, 2010

UK: Ambitious Asda outlines food expansion plans

Asda, the UK arm of Wal-Mart, said today (15 April) that it plans to open 100 small supermarkets over the next five years in a bid to become the "clear" number two food retailer in the country.

By Dean Best

Asda, the UK arm of Wal-Mart, said today (15 April) that it plans to open 100 small supermarkets over the next five years in a bid to become the “clear” number two food retailer in the country.

When measuring food sales only, Asda is the number three food retailer in the UK behind Tesco and Sainsbury’s.

However, in an investor meeting this afternoon, Andy Bond, chairman of the retailer’s executive committee, laid down the goal of taking the number two spot by 2015.

Bond, who announced on Monday that he would be stepping down as Asda CEO after five years in the job, said the retailer would aim to generate comparable-store sales growth “ahead of the market” between now and 2015.

Referring to Asda’s larger supercentre outlets, Bond said Asda would look to build “as many core stores as we can” but the most notable shift in strategy was to open more smaller outlets.

Bond said much of the growth in the UK retail sector was set to come from smaller stores and from online shopping. Asda, he insisted, needed to expand its business accordingly.

“It’s time for a new chapter,” Bond said. “It’s important to be a much clearer multi-channel and multi-format retailer. Over 50% of the space growth is likely to come from smaller stores [and] we want to achieve growth in smaller food stores.”

The Asda executive, who admitted that the company’s recent performance had missed expectations, also said that the retailer would refocus its efforts on a strategy of everyday low prices (EDLP).

However, the UK grocery sector remains characterised by fierce promotional activity and Bond admitted that an emphasis on EDLP in such trading conditions would be a challenge.

“It’s a pretty tough time to be an EDLP retailer. Every message out there is ‘half-price this’ and ‘half-price that’,” Bond said.

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