Asda invests £1.25 billion to fend off competitors

Asda, the U.K. supermarket chain owned by Wal-Mart Stores Inc. will invest £1.25 billion over the ne…

Asda, the U.K. supermarket chain owned by Wal-Mart Stores Inc. will invest £1.25 billion over the next five years to help stave off discounters and upscale grocers.

The retailer will spend £1 billion through 2018 on closing “the price gap” to budget stores such as Aldi and Lidl, while keeping the pressure on main competitors Tesco, Sainsbury's and Morrison's, CEO Andy Clarke told reporters in London today.

Asda will also invest £250 million on improving the quality, style and design of its products, Clarke said. The grocer plans to expand its reach to 70% of the UK population by 2018, up from 53% now, pushing particularly into the more affluent south east and London.

Asda is struggling to maintain its position as the UK’s second-largest grocer behind Tesco as more shoppers favor discounters and upscale stores.

Sainsbury's had four-week sales that exceeded Asda’s for the first time in more than a decade, Barclays analyst James Anstead said in an Oct. 22 note, citing figures supplied by researcher Kantar Worldpanel.

Asda this week reported a slowdown in same-store sales growth to 0.3% in the third quarter from 0.7% in the previous period.