The big grocers are running tit-for-tat price promotions to pull in shoppers as household budgets come under increasing strain. At Sainsbury's more than 30% of purchases going through the tills are on promotion and Tesco claims it has 18,000 lines on special offer.

Asda slashed the price of a limited range of goods to 50p early in the summer and today announced a fresh round of 50p deals including two pints of milk, a white loaf, six eggs and 250g of beef mince. The grocer refused to say whether the items are loss leaders — sold at a loss to pull in shoppers.

While some rivals are losing market share to discounters like Lidl and Aldi, Asda is still gaining ground. According to market research group TNS, Asda's share of the total weekly food shop rose to 12.3% in the 12 weeks to July 13, up from 11.7% a year earlier.

Sales of its Smart Price range of basic goods is up more than 20% in the past three months and frozen food is selling better than at any time in the last decade as shoppers try to cut out waste. The grocer has 700,000 more shoppers every week than a year ago and 25% of them are from the highest AB social groups. Sales of organics and premium ranges are up 36% and 20% on last year.

The grocer also said its stores in resorts have been trading particularly strongly as more people have chosen to holiday in Britain rather than go abroad. "The coastal stores have traded phenomenally well," said finance director Judith McKenna. "All of the south coast seaside stores have done well."

McKenna said the grocer had been forced to "do some cute things really quickly" in order to keep the shelves full at stores in seaside towns as demand had taken off.

Asda's stores in London — in a region where the grocer has always been relatively weak — have also been performing well. They are likely to have benefited from consumers trading down to lower-priced operators, but McKenna said Asda's shops in the capital have also improved their service standards and availability. The grocer denied that new shoppers were visiting stores only to buy goods on promotion, such as its 50p offers, but "are buying full baskets".

Asda's strong performance helped its parent company, Wal-Mart, deliver a 17% surge in second-quarter profits to £1.85bn in spite of tough economic conditions throughout its heartland. The US retailing empire is also proving resilient as shoppers trade down from more expensive rivals to buy food, clothes and household supplies at its cut-price superstores.

"Our customers represent a broad income segment and they are all challenged today," said Wal-Mart's chief executive, Lee Scott. "When energy and oil prices go up on top of inflation, health care and core food items, there's a great deal of pressure on the customer."

Excluding the impact of fuel sales, like-for-like sales at Wal-Mart's US stores rose by 4.5%. In common with other retailers, the company received a temporary boost as Americans spent fiscal stimulus cheques of up to $800 distributed by the treasury to boost the economy. The company's warehouse-style Sam's Club cash-and-carry stores did particularly well as shoppers sought out bargains.
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