TSCDY Tesco PLC (PK)

By Saabira Chaudhuri 

Asda, the U.K. supermarket chain owned by Wal-Mart Stores Inc., on Monday moved to delay store expansion in London and scale back its "click-and-collect" program as the retailer works to reinvigorate its physical store base and fend off a pair of discounters that have badly squeezed its sales.

The announcement marks a retrenchment by Asda, which vies with J Sainsbury PLC for the position of Britain's second-biggest retailer after Tesco PLC. Following a period of slumping sales during which Asda's market share has been eroded by cheaper rivals the company said it would slow its planned store expansion in London and won't develop more stand-alone gas stations, following a February purchase of 15 gas stations.

"We need to simplify what we do by prioritizing the first line of our strategy, improving our core business, and pausing activity in other areas so that we are not spread too thinly," Chief Executive Officer Andy Clarke said.

Asda had previously targeted 1,000 click-and-collect sites--or ones from which customers can collect groceries ordered online--by the end of 2018, up from the 650 it currently has across the U.K. A spokesman on Monday said Asda won't be opening more click-and-collect sites in tube stations, universities, and other locations not attached to stores.

The retailer will accelerate plans to refurbish 95 of its large stores and will spend more money on offering customers lower prices, a move it said was aimed at strengthening its position against the discounters.

"We do have a well-documented problem with sales at the moment," said the spokesman. "This is about how do we best return the business to sales growth but they've got to be profitable sales."

German discounters Aldi and Lidl have been steadily gaining market share from traditional supermarkets such as Asda and Tesco with low prices on a narrow range of mostly private label goods. Mr. Clarke on Monday noted that "the market is clearly undergoing permanent and rapid structural change."

The announcement comes after Wal-Mart last week predicted it would drop as much as 12% next year as the retail giant, based in Bentonville, Ark., puts money into improving stores, boosting online sales and increasing wages. Asda's click-and-collect program is being watched closely by Wal-Mart, which has been testing the format for its U.S. business.

An Asda spokesman said Monday's move "wasn't a directive from Bentonville" but that Wal-Mart was "supportive" of its decision to change course. The company will eliminate several noncore divisions including its business sales arm.

The company in August reported a 4.7% fall in same-store sales in the second quarter, with Mr. Clarke blaming the results on what he described as "the worst storm in retail history." Mr. Clarke at the time said Asda would change a five-year strategy it had laid out in 2013 to reflect changes in customer shopping habits.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

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(END) Dow Jones Newswires

October 19, 2015 10:16 ET (14:16 GMT)

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