Asda believes Sainsbury's may retake its position as the UK's second largest supermarket, its chief executive Andy Bond has warned.
Asda could be overtaken by Sainsbury's
Owned by US retail giant Wal-Mart since 1999, Asda took Sainsbury's second place two years ago, as its sales surged while Sainsbury's declined.
Yet Sainsbury's has recovered strongly over the past year, while Asda has missed internal targets.
Mr Bond said Asda plans to open new smaller stores to up its market share.
The company has previously focused solely on large out of town stores, despite both Sainsbury's and market leader Tesco opening a network of smaller inner city or convenience outlets.
'Neck and neck'
In an interview with the Financial Times, Mr Bond admitted it could take until the middle of 2007 to get Asda's growth back on track.
"We have bottomed out and Sainsbury's is back up the ski slope," he said.
"We have been neck and neck for a long time and they may overtake us."
Sainsbury's ongoing turnaround is being led by chief executive Justin King who took over in October last year.
Last month it reported a small rise in half-year profits, making £118m in the six months to 8 October, up from a restated £117m last year.
Mr Bond was appointed chief executive of Asda in March of this year.