UK supermarket Asda suffers worst quarterly sales fall

* Underlying sales slump 7.5 pct

* New CEO started in July

* Turnaround will take time -Wal-Mart CEO

* Eighth consecutive quarterly sales fall

* Britain's most profitable supermarket (Adds detail, CEO, analyst comment)

By James Davey

LONDON, Aug 18 (Reuters) - Supermarket chain Asda warned on Thursday a recovery under its new boss would take time after Wal-Mart's British subsidiary suffered its worst drop in quarterly sales and lost customers to rivals.

Sean Clarke, former boss of Wal-Mart's China business, took the helm at Asda last month after CEO Andy Clarke was fired.

He has been tasked with defending a UK market share that has slipped nearly 1 percentage point over the last year to 15.5 percent.

Asda needs to win back shoppers from German discounters Aldi and Lidl and from traditional rivals Tesco (Xetra: 852647 - news) , Sainsbury (Amsterdam: SJ6.AS - news) 's and Morrisons, who have all upped their games.

Asda said sales at stores open more than a year, excluding fuel, tumbled 7.5 percent in its second quarter, which ended on June 30.

The company's eighth consecutive quarterly fall comes a year after a 4.7 percent fall which its then-CEO deemed Asda's "nadir".

The 7.5 percent like-for-like sales fall was made up of a 6 percent decline in customer numbers and a 1.5 percent fall in average spending.

"The competitive environment and food deflation continued to challenge the market, significantly impacting traffic and comp sales. Our strategy to turn things around is focused on improving the retail basics," Wal-Mart CEO Doug McMillon said.

"While our turnaround will take time, I'm confident in the new leadership team there and want to assure you we're addressing this with urgency," he said.

NO 'RETAIL ARMAGEDDON'

Shares (Berlin: DI6.BE - news) in Asda's rivals were sent higher by its statement that maintained, rather than increased, a commitment to price cuts of 1.5 billion pounds ($1.97 billion) over five years which began in November 2013.

Shares in Tesco were up 2 percent, Sainsbury's up 2.8 percent and Morrisons up 2.5 percent.

"There has been much market speculation about what Asda may or may not do to solve its trading woes with some suggestions that a form of retail Armageddon was about to strike the UK," said Clive Black, analyst at Shore Capital.

"Today, we believe that Wal-Mart dispels such a possible expectation, doing as we felt it would. That is outlining a rational plan within existing price parameters."

Wal-Mart's McMillon said Asda would also improve product availability and reduce costs.

CEO Clarke was optimistic.

"There is no doubt in my mind that the culture that has always been at the heart of our success is still there," he said. "I feel positive about the future."

While Asda has lagged peers in sales performance for two years, it has been Britain's most profitable supermarket.

Asda said its gross profit was up in the second quarter but did not provide details nor any guidance for the full year.

Wal-Mart raised its annual profit forecast on Thursday after beating quarterly earnings expectations.

($1 = 0.7616 pounds) (Reporting by James Davey; editing by Paul Sandle and Jason Neely)