LONDON Asda, the British arm of U.S. retailer Wal-Mart (WMT.N), said underlying sales growth slowed in its latest quarter, though it remained one of the few major UK grocers still seeing growth.
Britain's retailers are mostly struggling as consumers' disposable incomes are eroded by rising prices, subdued wages growth and government austerity measures. Grocers traditionally cope better in tough economic times thanks to their focus on essential goods but even they are finding the going tough.
"These are solid results in a tough market," said Asda Chief Executive Andy Clarke, noting Asda had increased its market share to 17.5 percent, up 10 basis points year-on-year.
Official data on Thursday showed British retail sales posted a surprise fall in October as shoppers cut back on food and clothing purchases, reducing the chances consumers will boost the economy in the final quarter.
That data came a day after the Bank of England warned that Britain faced years of meagre economic growth coupled with rising prices, adding that its ability to numb the pain was nearing its limit.
Clarke told reporters a survey of its customers conducted last month found they were on average 13 pounds ($20.6) per week worse off than two years ago.
"Two thirds of mums surveyed tell us they expect 2013's economy to be more challenging than this year," he said.
Clarke joined calls for a freeze in fuel duty, saying a 3 pence per litre hike planned by the government for January "would come at the worst possible time for families who will already be feeling the cost of Christmas and energy price rises."
Asda, Britain's second-biggest supermarket chain behind Tesco (TSCO.L), said sales at shops open more than a year, excluding fuel and VAT sales tax, were up 0.3 percent in the 13 weeks to September 29, its fiscal third quarter.
That rise was below the 0.7 percent uplift Asda recorded in its second quarter.
Last month Tesco reported a 12.4 percent fall in first-half UK trading profit, while last week No.4 grocer Morrisons (MRW.L) posted a 2.1 percent fall in third-quarter underlying sales, highlighting high levels of promotional activity.
No. 3 player Sainsbury's (SBRY.L) has, however, been outperforming, posting a 5.4 percent rise in first-half profit on Wednesday.
The performance of Asda, which trades from 555 UK stores serving over 18 million shoppers a week, reflects its focus on low prices for key commodities such as bread, milk and eggs, as well as revamped fresh food lines and increased penetration of own-brand food ranges.
The firm has benefited from its price guarantee offering to refund customers the difference, via a voucher, if an online price comparison website does not show their shopping is at least 10 percent cheaper than at a rival.
Recent industry data has shown Asda increasing sales faster than its main rivals, apart from Sainsbury's, into its fourth quarter.
Asda's sales data was released as parent Wal-Mart posted quarterly sales below analysts' expectations.
(The sixth paragraph of this story has been corrected to say 13 pounds per week, not per month)
(Editing by Sarah Young and Helen Massy-Beresford)