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Asda suffers fall in like-for-like sales after seeking to undercut rivals Tesco and Sainbury's

THE challenge facing Asda as it attempts to win customers by professing to undercut its key rivals was highlighted by a 0.1% fall in like-for-like sales.

While market-leader Tesco and Sainsbury's, Asda's close rival for the number two spot, have developed increasingly sophisticated systems of vouchers, often generated at their tills, Asda has pulled out of vouchers altogether in an effort to focus on pricing.

But the move has yet to come off with a sales dip in the 13 weeks to January 3, albeit one that Asda said was accompanied by a gain in sales volumes, led to muted 0.5% sales rise for the full year.

Andy Clarke, Asda's president and CEO, said: "Last year was a tough year, a year of change.

"Coming out of vouchering was a significant change for us.

"We are now in a year of not having that voucher baggage in our proposition."

He added: "The first quarter of this year is going to continue to be very challenging."

Asda's position is made particularly challenging because the Leeds-based business is stronger in the northern parts of the UK.

"The economy is still fragile so customers still feel very fragile in terms of their level of expenditure," Mr Clarke said.

"If you live in London and the South East you may feel distinctly happier than if you are in the rest of the UK."

Asda said people in Northern Ireland and north-east England have particularly low disposable incomes currently.

Asda's chief merchandising officer Barry Williams said of Scotland: "It is tough there as well."

The grocer, owned by US giant Wal-Mart, said it had spent the equivalent of £180 million reducing prices and offering high profile deals on popular items.

Alex Russo, recently hired from Tesco to be Asda's finance director, said: "We have the widest price gap to Tesco we have ever had and the closest gap to Aldi and Lidl."

Mainstream grocers, Mr Clarke argued, are being "squeezed" between discounters at the bottom end and the likes of Waitrose at the top.

Mr Williams claimed that vouchers generated at till points to compensate customers who could have bought their shopping cheaper elsewhere are "an admission of guilt".

Shoppers, he asserted, "are becoming less and less interested in gimmicks".

Asda has pledged to spend £1bn on lowering its prices.

In 2014 the company will invest £750m in opening news stores, store extensions and refurbishments.

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