Asda's £360m plan will create 3,900 jobs

Asda yesterday provided ample reason for parent company Wal-Mart's avid interest in Britain when the supermarket chain posted strong gains during 2002, including a jump in non-food sales of around 25 per cent.

The third largest supermarket in Britain also announced plans to create 3,900 new jobs as part of a £360m expansion plan. It is to build seven new stores, relocate three others and expand five more, including the addition of mezzanine floors to get around increasingly restrictive planning laws.

Wal-Mart, the world's largest retailer, signalled its intention to expand in Britain recently when it emerged as one of the many bidders for Safeway, the UK's fourth largest grocer. It faces competition from supermarket chains including Wm Morrison, J Sainsbury and Tesco, retail entrepreneur Philip Green and private equity group Kohlberg Kravis Roberts.

Wal-Mart, yesterday named as the "most admired" company in the US by Fortune Magazine, said group profits for the full year had topped $8bn (£5bn), up from $6.7bn during 2001. Sales for the year were 12.3 per cent higher at a breathtaking $244.5bn - Wal-Mart's revenues are higher than any other company in the world.

Chief executive Lee Scott singled out the international operations of the business for praise, particularly Canada, Mexico and Britain where he said he continued to be encouraged by general merchandise sales.

The international division contributed operating profits of just over $2bn for the year, an increase of 56 per cent on the previous 12 months. Asda accounts for roughly half of Wal-Mart's international revenues.

The company does not break down the international division further. But Asda said like-for-like food sales during the year grew in the high single digits in percentage terms, while non-food sales rose in the mid-20s on strong sales of clothes, electrical goods, entertainment and home products. The George clothing brand, first put together by Next founder George Davis, continues to perform well.

Wal-Mart has been working to improve its global buying power and sourcing of products and Mr Scott said he expected earnings in the next five years to be chiefly driven by synergies from the retailer's operations around the world.

Concerns have been voiced in Britain about the increasing power of the few remaining supermarket groups. The office of fair trading has invited comments on the Safeway auction and is expected to make recommendations to the Department of Trade and Industry next month.

Wal-Mart acquired Asda in 1999 and has built the number of stores from 229 to 258, gradually exerting its influence. A further two stores in Sheffield and Wigan were yesterday earmarked to be turned into "supercentres" selling a broader range of products, including sports equipment or even furniture, mirroring Wal-Mart in the US.

Wal-Mart, known for its discounting in the US, has also put pressure on pricing. Asda claims to have cut prices by £500m in the past four years - the price of George jeans has been reduced from £14.99 to £6.

The idea of adding mezzanine floors to Asdas to provide more selling space has been trialled in York. For three months, the store moved goods into secure marquees in its car park so that the supermarket could continue to trade while the loft space was converted to add an extra floor.

Mr Scott said the year had been "exciting, challenging and in some cases troubling".

The challenging element referred to a marked slowdown in consumer spending in the US over the past year as the faltering economy, terrorist threats and potential conflict in the Middle East have unnerved shoppers.

The troubling element was the poor performance of its US Sam's Club warehouse stores.