Asda has claimed it will spend GBP1bn (US$1.61bn) on lowering prices in a bid to “widen the gap” with its big three rivals, Tesco, Sainsbury’s and Morrisons.

The UK’s second-largest grocer also said the investment would see it move nearer in price to the discounters operating in the country. In recent quarters, retailers including Aldi and Lidl have grabbed market share from the larger grocers in the UK.

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The offensive on price is one of a set of “strategic priorities” announced today (14 November) by Asda president and CEO Andy Clarke for the next five years.

Asda, the UK arm of Wal-Mart Stores, plans to spend GBP250m on “quality, style and design” across its product portfolio and expand further in parts of the UK where its market share is low, particularly London and the South East. It also plans more investment online, with a target of 1,000 click-and-collect points in the next five years.

The retailer said the moves would be funded “through savings generated by Asda’s continuing ‘We Operate For Less’ programme, as well as through the global leveraging power it has with parent Wal-Mart”.

The announcements were made as Asda reported the results for its third quarter. For the 13 weeks to 4 October, like-for-like sales were up 0.3%. However, the figures indicated Asda’s sales were slowing further. In the second quarter, LFLs were up 0.7%; in the first quarter, they increased 1.3%.

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According to data released today by Wal-Mart, Asda’s operating profit was up 13.2%, with earnings helped by sourcing “efficiencies” and reduced markdowns on non-food products.

Clarke said he was “pleased” with Asda’s performance in the third quarter. “The market conditions are tough, competition is fierce and our customers’ budgets are under intense pressure. We’ve continued to invest in lowering prices which has held them down for our customers while driving volume growth. This means we enter the crucial fourth quarter in a solid position.”

According to the latest published data from Kantar Worldpanel, Asda accounted for 17.2% of grocery sales in the UK.

The figures, for the 12 weeks to 13 October, showed Asda’s market share dipped 40 basis points. They also illustrated Sainsbury’s market share was 16.7%. Yesterday, Sainsbury’s reported financial results for the first-half of its financial year, which included higher profits and a 1.4% increase in like-for-like sales. Sainsbury’s claimed it was outperforming the market.