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Asda has heralded its first quarterly growth in more than two years as the supermarket’s boss said it was attracting more shoppers with lower prices and an improved online service.

Allan Leighton, executive chair of the UK’s third-largest grocer, said a 0.2% rise in sales at established stores, excluding fuel, in the three months to the end of June was “a huge milestone” which was “psychologically important for the business”. In the previous quarter sales fell 2.3%.

“Our price position is strong, we are now getting more customers in the business and we have got some momentum online and that’s been the biggest drag,” Leighton said. The last time Asda’s sales rose was in the first three months of 2024.

He said Asda’s performance had been aided by more stability in its IT systems after a traumatic and expensive shift from the technology of its former owner, Walmart. In 2020 the billionaire Issa brothers and the private equity firm TDR Capital bought Asda in a £6.8bn takeover. TDR now controls the business.

Since the buyout, Asda has been struggling with falling sales and profits as well as a huge debt pile, while paying out close to £1bn to revamp its IT systems. Leighton returned to help turn around the business for the second time in his career in November 2024 after a 20-year absence.

Despite inflation on groceries in the UK, Asda’s sales had been falling as the problems with its technology meant it struggled to keep shelves stocked, while also facing heavy competition from the cut-price chains Aldi and Lidl, as well as from bigger rivals Tesco and Sainsbury’s.

Aldi is now less than one percentage point behind Asda in terms of market share and continues to grow at a faster pace, threatening to steal its rival’s spot as the UK’s third-largest chain.

Leighton has said it is not inevitable that Aldi will leapfrog Asda as the bigger chain fights back with measures including a deal with the online specialist Ocado to provide technology to improve its website and delivery systems from next year.

“There is some momentum in the business and it is upwards and that is important,” Leighton told the Guardian. He had “never felt not confident”, and Asda could be revamped as “the business is too good not to be turned around”.

He said growth had been led by food, sales of which were up 0.7% at established stores during the quarter. Sales of clothing and other non-food products fell as Leighton said the wider market was tough, and sales in its clothing and general range had been held back by the late August bank holiday.

Inflation on food is appearing on some areas of produce, such as tomatoes and cucumbers, as the hot dry summer hit crops, but Leighton said Asda was managing stocks and pricing of petrol well despite high fuel prices linked to the war in Iran. “Produce is the pinch point,” he said.

Leighton said it was not clear if shoppers’ sentiment had improved since Andy Burnham became prime minister and there was a sense households were waiting to see how things panned out in the autumn and with the October budget announcement.

“People are waiting to see,” he said. “I think John Healey is a good choice as chancellor he is very sensible and objective.”

But, he added that “clarity on the budget and economic plan” would be key to consumer and business confidence. “The key economic policy of the [Labour] government so far has been to inhibit growth,” he said and he wanted to see as a minimum policy that “doesn’t inhibit growth and [ideally] enhances growth”.

He added: “That has got to be by not pulling more cost into business as he called on the government to consider excluding retailers from the additional business rates for larger buildings.