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* Q2 like-for-like sales up 0.5 pct
* Says profit up in line with sales growth (Recasts, adds detail, CEO comments)
By James Davey
LONDON, Aug 14 (Reuters) - Asda, the British arm of theworld's biggest retailer Wal-Mart, reported anacceleration in quarterly sales growth and hailed theimprovement as proof that its price-cutting strategy is working.
Asda was the first of Britain's so called big four grocers,which also include market leader Tesco, Sainsbury's and Morrisons, to counter the threat posed bydiscounters Aldi and Lidl by cutting itsown prices.
The company said in November that it would spend 1 billionpounds ($1.67 billion) on lowering prices over the next fiveyears.
Sales at Asda stores open for more than a year, excludingfuel, rose 0.5 percent in the 10 weeks to June 30, the grocer'sfinancial second quarter, versus the same period last year - animprovement on first-quarter like-for-like sales growth of 0.1percent.
Asda's market share improved by 14 basis points, while itincreased profit in line with sales growth. Its online salesrose by more than 20 percent.
"What's clear from our performance from a market shareperspective and our comp (like-for-like sales) position is thatwe are differentiating ourselves now from the other big threeretailers," Chief Executive Andy Clarke told reporters.
Tesco, Morrisons and Sainsbury's have all posted sales dipsin their most recent updates. Tesco and Morrisons have alsoissued profit warnings, with the former also parting companywith its chief executive.
COST-CONSCIOUS MARKET
Clarke noted levels of disposable income were very differentin London to regions such as the north east of England andNorthern Ireland.
"If you're a family on a budget in those difficult regionsit still feels very challenging. There is undoubtedly atwo-stage (economic) recovery," he said.
"We're very mindful of that, which is why our strategyaround value is working."
Pledges to cut prices have also come from Tesco andMorrisons, while Sainsbury has vowed to remain competitive,raising analysts' concerns about a possible price war hittingmargins and earnings across the industry.
The overall UK grocery market grew by 0.9 percent in the 12weeks to July 20, the lowest figure for 10 years, according todata published by Kantar Worldpanel last month.
British consumers are shopping around for the best prices,buying little and often and wasting less, increasingly optingfor convenience stores or online shopping.
The Bank of England gave a generally upbeat quarterlyeconomic update on Wednesday, with upgrades to the growthoutlook for this year and next, lower unemployment and inflationremaining just below its 2 percent target.
However, data showed that average wages in Britain fell forthe first time in five years during the three months to June.
Separately on Thursday, Wal-Mart cut its full-year profitforecast, citing higher employee healthcare costs and increasedinvestment in its online business. ($1 = 0.5993 British Pounds) (Editing by Sophie Walker and David Goodman)
