SINCE 1985 when Mr John Hardman took over the running of Asda, the

Northern supermarket chain, he has been racing to catch up his rivals,

in establishing Asda's own brands; adding delicatessen, fresh veg and

clothes and shoes sections to the grocery stores; introducing electronic

check-outs; installing computer systems to control stocks; building a

chain of eight warehouses and many new stores in promising areas, and

refurbishing the rest.

The programme will be complete next year except for new stores, where

Asda awaits the result of the bids for Gateway. If Isosceles wins, Asda

will buy the 62 good supermarkets stores in Gateway's chain for #705m.

If Newgateway wins, Asda will keep its programme of fifteen openings a

year rolling, while Newgateway struggles to bring Gateway up to scratch

too and pay off its towering borrowings.

Of course, Asda's own rivals have not stood still, while it has been

galvanising itself, and last year its existing stores' sales marked time

in volume. It owed a 14.5% rise in profit to #246.6m on sales 10% up at

#2900m, to good results from new and refurbished stores; to an

exceptional profit of #5.9m at MFI furniture in which it has kept a 25%

stake and to a one third rise to #13.8m in profit at the carpet stores.

But while high interest rates checked non-food sales last winter, Asda

now claims to be increasing its share of the carpet market and George

Davies, who made the Next shops go, will be arranging Asda's supplies of

clothes next spring.

The tailing off of the modernisation programme will save costs

equivalent to 1!/;1/% on margins, which have climbed from 5.4% to 7% in

four years. And if it does buy the Gateway stores, it reckons to get its

gearing back down from 80% to 40% inside two years by imaginative

financing and revaluation of its properties.

So, the dividend is raised 17% to 4.8p, with a final payment of 2.95p.

The shares at 180p, down 1p, yield 31!/;1/%, and stand at 12.6 times

historic earnings. A modest rating which balances the strength of the

competition against the 41!/;1/% stake recently built up by the

Belzbergs, the Canadian corporate raiders, and the possibility that

Tengelmann, the German stores behind Newgateway's bid for Gateway, might

go for Asda if that bid fails. We shall see.