Asda has revealed its underlying earnings swelled by a quarter last year with growth in food and clothing sales.

The UK’s third-biggest supermarket chain said its underlying earnings, before additional costs like tax and interest, rose by 24% to £1.1 billion over 2023, compared with 2022.

It came as supermarket sales, excluding fuel, grew 5.4% on a like-for-like basis, which excludes the impact of new stores opening during the year.

Total sales, excluding fuel, hit nearly £22 billion during the year, as the chain said it had benefited from about six million customers now using its loyalty app to shop with the retailer.

Around half of all sales are linked to its reward programme, Asda Rewards, which it described as a “key revenue driver” for the business.

The group, which runs fashion retailer George, said clothing sales edged up by 3.4% to total £1.5 billion.

Mohsin Issa, Asda’s Co-owner, said: “Our strategy is all about growth and Asda increased underlying profit to more than £1bn and like-for-like sales by over 5% last year, while significantly growing free cashflow and reducing leverage.

"We are committed to doing the right thing for customers, colleagues and local communities – and are putting in place the strategic building blocks to set up Asda for long-term success.

“As well as investing in price to maintain our position as the cheapest traditional supermarket, we continued to invest in further enhancing the quality of our products, building on the earlier successful launch of the budget-friendly Just Essentials brand with a significant own-label transformation programme.

"This saw us launch thousands of new and improved food lines to drive quality perception among consumers, including a refresh of our entire ready meals range.

“This investment includes non-food and saw George maintain its market leadership position in back-to-school wear and deliver total clothing sales growth of 3.4% last year – helped by our ongoing focus on price, quality and style.

“We continue to strengthen the business by expanding in the growing convenience and food-to-go sectors,  leveraging our loyalty app and driving innovation in online grocery where we are the UK’s second largest supermarket.

“I would like to thank our colleagues for their hard work over the last year, serving millions of customers each week. Our recent investment in pay – a record £150m – will see Asda become the highest paying traditional supermarket in the UK and reflects how much we value the contribution of every colleague.”

Asda’s Chief Financial Officer, Michael Gleeson said: “Around half of all sales are now linked to Asda Rewards and around six million customers use the app – making it a vital tool for them to manage their household budgets as well as being a key revenue driver for the business."

The publication of its annual results comes amid reports that Mr Issa’s brother, Zuber Issa, is getting ready to sell his stake in the group to private equity group TDR Capital, according to reporting in Bloomberg.

The Issa brothers joined forces with TDR to buy Asda three years ago.