Asda heralded the release of quarterly figures by promising a festive price war. Britain’s second-largest supermarket yesterday announced price reductions that it claimed would save customers £150 million by Christmas, prompting Tesco to claim it was cutting £250 million from its prices.

Judith McKenna, chief financial officer at Asda, said: “This Christmas will be the most aggressive in pricing for a decade.”

She added that the company had responded to falling food commodity inflation by undercutting competitors. “We’ve taken the lead, lowering prices more quickly than rivals by a bigger amount,” said Ms McKenna.

Like-for-like sales grew by 5.6 per cent, excluding fuel and VAT, in the three months to September 30. This was down from 7.1 per cent in the year-to-date. Asda said the drop-off in sales growth could be attributed to the fall in food prices.

The company increased its share of the grocery market from 16.9 per cent to 17.3 per cent, stretching its lead over J Sainsbury, the third-largest supermarket, with a share of 15.9 per cent.

Asda is alone among the big four supermarkets in not offering an enhanced loyalty scheme in the run-up to Christmas.

Ms McKenna said: “Our low prices are unconditional. We refuse to ask customers to spend more in order to get a little back later.”

Tesco, the market leader, doubled the discount available through its vouchers for Christmas, while Sainsbury’s improved its Nectar Card rewards and has launched its first television advertising campaign that highlights its loyalty scheme.

Morrisons has a Christmas Collector system intended to prevent customers from defecting to supermarkets with bigger non-food offers as they shop for gifts.

Asda and Wal-Mart, its American parent company, both sounded cautious notes on the prospects for a consumer recovery next year.

Ms McKenna said: “Our customers tell us that what they’re hearing about future tax hikes, and public sector job cuts are making them more than a little nervous.

“The one thing I am certain of is [that] this will not be a straight-line recovery.”

Wal-Mart, the world’s largest retailer, reported net profits of $3.23 billion (£1.9 billion) for the three months to October 31. This compared with $3.14 billion for the same period last year. Total sales grew to $99 billion, an increase of 1.1 per cent on the third quarter last year.

Revenues at Wal-Mart were hit hard by foreign exchange movements, and excluding the effects of these, net sales for the third quarter would have been up 3.8 per cent at $101 billion.

Like-for-like sales, excluding fuel, at Wal-Mart and the company’s Sam’s Club discount warehouse chain were down 0.4 per cent.

Mike Duke, Wal-Mart’s president and chief executive, said that while the trading environment continued to be challenging and customers were yet to benefit from signs that the US economy was growing again, traffic was up throughout the company.

“We gained market share, especially in the United States, the United Kingdom and Mexico,” he said.

Wal-Mart’s caution weighed on retail stocks on Wall Street yesterday, as the company said it was predicting flat like-for-like sales in the vital festive quarter from October 31.

It has responded by embarking on a campaign to be the leader in low prices in the run-up to the holidays, taking on the likes of Amazon and Target by cutting the price of toys, books and DVDs.

Sales dip at WH Smith

WH Smith, the stationer and bookseller, said it was braced for a challenging festive season, adding that it remained cautious on trading prospects after reporting a dip in sales. Sales in the ten weeks to November 7, since the start of its financial year on September 1, slid 1 per cent on 2008, while revenue in airport and railway-station stores fell 2 per cent on a like-for-like basis. The worst performing sector was the high street, where same-store sales dipped 4 per cent, though the company said its overall performance was in line with expectations.

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