Aldi’s British and Irish arm saw its profits fall by more than a quarter last year due price cuts and investment in its infrastructure. However, the discounter reaffirmed its plans to continue its rapid expansion, with London now a key area of focus.
In the year to 31 December 2018, Aldi’s operating profit was down 26% to £197.9m on sales up 11% to £11.33bn, driven by new store openings. Pre-tax profits fell 18% to £182.2m.
The company emphasised that the fall in profits was not just a result of a £531m investment in infrastructure but also cuts for its customers to maintain its price advantage over the major supermarkets multiples.
Aldi currently has 840 outlets, with plans to open a another 100 across the UK over the next two years as part of its long-term target of 1,200 stores by the end of 2025. The company is planning to invest £1bn in stores and distribution centres across 2019 and 2020.
Aldi revealed today that expansion in London was now an increasing focus for the business. Its market share within the M25 is only 3.4% compared to 8.1% nationally. Aldi plans to increase store numbers in the capital from 45 to 100 by the end of 2025, by opening more standard-sized outlets and its new, smaller ‘Local’ stores on high streets.
The discounter began trialling the Local format in March with customer response said to have exceeded expectations. It measures around half the floor area of a typical Aldi store and sells around 1,500 of the chain’s usual 1,800 SKUs. “London shoppers regularly tell us they would switch to Aldi if there was one nearby, so there is clearly a significant growth opportunity for us in the capital,” said Chief Executive Giles Hurley.
He added: “For almost three decades we’ve proven that investment equals growth – investment in our infrastructure, our people and our prices. The commitment we have made to our customers to continue investing in the UK over the coming years remains as strong as ever.”
Commenting on Brexit, Hurley said the retailer was working to ease any no-deal impact. He told the BBC: “I can’t guarantee the availability of every single product. But actually that’s no different from anyone else. What we will do is shield our customers from as many ripple effects as possible. I can’t commit that prices won’t go up. I’m not alone in the industry on that but what I can guarantee is that customers will always pay the lowest grocery prices with Aldi.”
Hurely stressed the chain was working “very closely” with its supply base and that he believed the business was in a “solid position” because 75% of what its sells comes from British suppliers and manufacturers.
NAM Implications:
- Key issue with Brexit could be maintaining their quality/price ratio.
- Also maintaining their buy British positioning if Tesco/Asda import cheap product.
- Failing this Tesco/Asda intervention, it is probable that Home Bargains and B&M will fill the gap…
