Asda, the British arm of U.S. retailer Wal-Mart Stores, reported a pick up in third-quarter sales growth, helped, it said, by revamped own-brand food ranges and a pledge to be cheaper than rivals.
Sales at stores open more than a year rose 1.3 percent, excluding fuel and VAT sales tax, in the three months to September, Britain's second-biggest supermarket group behind Tesco said on Tuesday.
That followed 0.5 percent growth in the second quarter and 0.1 percent in the first.
Asda's third-quarter data was released as parent group Wal-Mart posted quarterly profit growth below expectations, as the economy weighed on customers in the United States, home of the company's largest division by far.
Asda, which trades from 542 stores, lagged Britain's grocery market for most of 2010, but has fought back this year, helped by its purchase of smaller format Netto stores and a relaunch of its own-brand food range.
The chain, which completes the conversion of former Netto stores next week, said it was benefiting from a price guarantee which offers to refund customers the difference if an online price comparison website does not show their shopping was at least 10 percent cheaper than at a rival.
Asda said over 13 million baskets have been checked online by customers this year.
Customer traffic fell 1.3 percent and the average transaction rose 2.6 percent in value in the third quarter, as cash-strapped shoppers made fewer trips in the face of high fuel prices, it said.
The cost of petrol and household utilities will continue to be the biggest contributors to the squeeze on personal disposal incomes, said Helen Dickinson, head of retail at KPMG.
This squeeze will continue to affect retail spending which has remained largely subdued even as we enter the peak trading period of the year, Christmas.
FEELING THE PINCH
Although inflation eased more than forecast to 5 percent in October, Britons are feeling the pinch as disposable incomes are squeezed by muted wage growth and government austerity measures, and as they worry about a stagnant housing market, job security and a fragile economic recovery.
The British Retail Consortium, an industry group, said last week a fall in October sales from stores open more than a year augured badly for Christmas trading, while, on Sunday, John Lewis, Britain's biggest department store group, said sales dipped in the week to November 12.
Also on Tuesday, Debenhams, Britain's no. 2 department store group, launched its deepest ever pre-Christmas discounts.
With the grocery market entering what is traditionally a heavily promotional Christmas period, data from market researcher Kantar Worldpanel last week showed Asda growing faster than the overall grocery market for the first time since early 2010.
Tesco announced a 500 million pound ($795 million) investment in lower prices in September in a bid to lure shoppers and stem market share losses.
Asda's underlying sales growth compared with the 2.4 percent increase reported by Wm Morrison Supermarkets over the 13 weeks to Oct 30, a 1 percent rise from J Sainsbury in the 16 weeks to October 1, and a 0.7 percent drop for Tesco in the 13 weeks ended August 27.
Asda also said it was on track to deliver 800 million pounds savings by 2020 through sustainability initiatives.
($1 = 0.629 pound)
(Editing by Rhys Jones and Dan Lalor)