Supermarket Asda admitted it had been a "tough year" as it posted a drop in festive sales despite slashing prices to keep pace with discounters.

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The UK's second biggest grocery chain saw comparable store sales fall 0.1pc in the 13 weeks to January 3, leaving overall full-year sales 0.5pc higher.

It said it had ramped up investment in price cuts to more than £60 million over the Christmas quarter under a £1 billion investment plan outlined last November.

Andy Clarke, president and chief executive of Asda, said: "It will come as no surprise that 2013 was a tough year for UK retailers and there's little doubt that the UK retail market is undergoing significant and permanent structural change.

"Though the economy is showing signs of recovery, it is still susceptible to shocks and the benefit is not yet being felt right across the country."

Figures from its rivals have already revealed how difficult the festive period was for the "big four" supermarkets, with the chains resorting to aggressive discounting to lure in cost-conscious shoppers as they faced increasing competition from the likes of Aldi and Lidl.

Market leader Tesco blamed a weak market for its 2.4pc drop in UK like-for-like sales over the six weeks to January 4, while a 5.6pc decline in sales over the festive period for Morrisons led the Bradford-based chain to warn over profits.

Even resurgent player Sainsbury's posted largely flat sales over the quarter to January 4, up just 0.2pc, in what it described as a "very tough sales environment".

Recent figures from Kantar Worldpanel signalled no let up in the difficult conditions, showing the weakest growth in the overall grocery sector since 2005.

The data revealed that till rolls were 2.4pc higher in the 12 weeks to February 2 - which includes inflation of 2.1pc.

Asda joined Tesco and Morrisons in losing market share over the period, to 17.3pc from 17.7pc a year earlier, even though it managed to grow sales by 0.5pc, according to Kantar.

Leeds-based Asda has been fighting to maintain its position as the second biggest chain as strong growth has helped Sainsbury's narrow the gap, with a market share of 17.1pc.

Asda announced its £1 billion plan last November to help sales growth recover, with aims to deliver £200 million of investment in price cuts in 2014 and £750 million in store revamps and new openings.

It is looking to expand into London and the South East to increase physical access to the brand from 53pc to 70pc by 2018.

The group said it was committed to lowering prices rather than offering money-off vouchers - a tactic used by its major rivals.

Barry Williams, Asda's chief merchandising officer for food, said: "Retailers are using vouchers to cover up price increases - what they are giving away with one hand, they are taking back with the other.

"That's not a game we are interested in playing with our customers' hard earned money."

Asda's figures were released as US parent Wal-Mart also reported sliding sales and profits in its fourth quarter.

It said group profits dropped 21pc over the period, with like-for-like sales at US stores dropping 0.4pc - the fourth quarter in a row of sliding sales.

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