Asda was counting the cost of the fierce price war between Britain’s supermarkets yesterday, as it reported a dip in quarterly profits.

The group said that operating income in the three months to September 30 had fallen marginally below the levels of a year ago, despite “market-leading” sales.

Asda began a summer price war in July and recently announced a second £150 million wave of price cuts for the run-up to Christmas.

A spokesman insisted that the slide in profits was fully in line with expectations at Wal-Mart, the American owner of Asda, given an aggressive investment programme set out at the start of the year. He said: “We’d always planned to invest more heavily in the third quarter this year than last. Our profit remains ahead of plan for the year, as do our sales.”

Like-for-like growth in the third quarter across the business was in the “low single digits”. The spokesman added that workers were in line for bigger bonuses than last year.

However, the figures came as TNS market research data showed fresh signs that Wm Morrison was finally gaining momentum under Marc Bolland, the chief executive, who was appointed a year ago.

Total sales at Morrison are understood to have climbed by nearly 10 per cent on last year in the four weeks to November 4. Shares in the group, which recently launched a television advertising campaign featuring celebrities such as Denise van Outen and Alan Hansen, closed 4 per cent higher, up 10¾p to 276½p.

One analyst said: “The data suggests a very sharp upturn and we’ll need to see if this has fed through to Morrison’s like-for-like growth.”

TNS said that Morrison’s share of the grocery market was 11.1 per cent at the start of November. Tesco’s market-leading share was 31.5 per cent, with Asda at 16.7 per cent and J Sainsbury third at 16 per cent.

Andy Bond, the chief executive of Asda, acknowledged last year that the supermarket chain had lost its way and said he feared that Sainsbury’s could regain the No 2 spot.

He insisted yesterday that the recovery programme was paying off and added that Asda had won 750,000 more customers since the start of the year through its focus on price. Mr Bond said: “We’ve cut 30,000 prices so far this year and customers are voting with their feet.”

In its third-quarter results, Wal-Mart reported an 8 per cent growth in profits across its empire to $2.86 billion (£1.38 billion), beating expectations on Wall Street. Revenue at the group, the world’s largest retailer, rose by 8.8 per cent to $91.95 billion.

Lee Scott, the president and chief executive of Wal-Mart, lifted earnings targets for the full year and said that the group’s focus on price was paying off.

He said: “We believe we are well positioned to win in this environment. During the Christmas and holiday season, our price-leadership position will benefit both our customers and the company. We have set the stage for a successful fourth quarter.”

Wal-Mart shares rose as much as 6.5 per cent on Wall Street, up $2.82 to $46.14. Adrianne Shapira, a Goldman Sachs analyst, said: “We continue to view Wal-Mart as an excellent place to hide in the current choppy macro environment.”

Sainsbury’s aim

Justin King, the chief executive of J Sainsbury, will today reiterate his aim of adding £3.5 billion to sales by 2010 as he draws a line under the Qatar Investment Authority’s decision last week to scrap a £10.6 billion takeover bid for the retailer.

Half-year results are set to show that pretax profits rose by more than 20 per cent to £231 million in the six months to October. Last month the group said that like-for-like sales growth had slowed to 3.1 per cent in the second quarter.

A source close to Robert Tchenguiz, the property tycoon with a 10 per cent stake in Sainsbury’s, yesterday renewed calls for the company to sell off its freehold property. He said: “They weren’t open for discussions four months ago. Maybe they will listen now.”

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax