Walmart's (WMT) third-quarter earnings report revealed a dire performance by its U.K. division, Asda.

Britain was Walmart's weakest international market by a country mile, recording a decrease in sales of 5.8% compared with the same time last year and a fall in traffic of 4.2%. The fall in sales has, however, slowed from last quarter, which saw a record of decline of 7.5%.

In stark contrast, Walmart's Mexico and Central America division saw sales growth of 7% compared with last year, and Brazil clocked in with a staggering 8.1%.

The company in its third-quarter earnings announcement said its key priorities in Britain were to improve customer experience and build sales momentum.

Walmart executives on a call today reiterated that they are trying to fix the U.K. business by sharpening price points and improving merchandise selection.

So what is going wrong at Asda? A fierce price war is underway in the U.K. food retailing sector as low-cost competitors Aldi and Lidl threaten the so-called "Big 4" supermarkets -- Tesco (TSCDY) , Sainbury's (JSAIY) , Asda and Morrisons. (MRWSY)

But inflationary pressure due to the fall in the pound could kill this strategy. Britain's headline inflation rate  fell unexpectedly last month to 0.9%, after hitting 1% in September, though few expect the price reprieve to last.

Kantar Worldpanel predicts prices will increase in December, "unless retailers choose Christmas to unleash a new round of price cuts."

This has put pressure on market share. Data released by Kantar Worldpanel on Tuesday show Asda suffered another embarrassing slip, with market share down to 15.5% from 16.4% last year for the 12 weeks ended Nov. 12, putting it firmly in third position.

Tesco has a tight grip on the No. 1 spot, with 28.2% market share, Sainsbury comes in second at 16.3%. Fourth-ranked Morrisons has 10.5%.

Analysts were expecting big changes from Asda's new CEO Sean Clarke, but those changes are yet to funnel through to sales and market share.

Today he said, "Putting customers first and foremost is at the heart of our business. We have lowered thousands of prices, improved hundreds of own brand products and invested in more hours for colleagues on the shop floor."

Shares of the world's largest retailer fell about 4% Thursday to $68.43 as total group sales rose 0.7% in the third quarter from the prior year to $118.2 billion, missing Wall Street forecasts for $118.8 billion. Sales were clipped by $2.1 billion due to the relative strength of the U.S. dollar since the summer months.

--Brian Sozzi contributed to this report

More from Investing

Street Stats: The Mid-Term Elections May Be a Rollercoaster Ride for Investors

Street Stats: The Mid-Term Elections May Be a Rollercoaster Ride for Investors

Trump's Oil Tweets Ruining the Stock Market's Rebound?

Trump's Oil Tweets Ruining the Stock Market's Rebound?

A BJ's Wholesale IPO Is Logical Next Step

A BJ's Wholesale IPO Is Logical Next Step

Tesla Investor Pushing for More Board Changes

Tesla Investor Pushing for More Board Changes

What You Need to Know About Facebook and Europe's New Privacy Rules

What You Need to Know About Facebook and Europe's New Privacy Rules