United Kingdom: Aldi will invest £1 billion

Aldi store in UK. Photo: Gery Perkin
By Reidar Molthe

19 September 2019 14:13

United Kingdom: Aldi will invest £1 billion

Aldi will double its stores in UK after sales increase of 11%. Aldi says it will step up the pressure on rivals by increasing store numbers in London from 45 to 100 by the end of 2025, by opening more standard-sized Aldi stores and new, smaller-format Local stores on London high streets.

The German discounter saw an 11% increase in sales to £11.3 billion in the year to December 31 in UK. Hence, Aldi has decided to invest £1 billion in expanding its store estate over the next two years, after posting “record results”.

However, its profits before tax fell 18 per cent to £182.2 million due to ongoing investments in its infrastructure and promotional pricing, writes Retail Gazette and Reuters.

In any case, 11 percent increase on top line, in the grocery business, is extremely strong and probably ‘scaring the mind out of’ Tesco, Sainsbury’s, Asda and Morrisons.

Every part of the UK

“Whilst our expansion will continue to reach every part of the UK, we’re increasing our focus on London, where our market share is just 3.4 per cent, compared to 8.1 per cent nationally,” Aldi UK and Ireland chief executive Giles Hurley says in a statement. He continues:

“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. 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.”

Aldi’s focus is growth

Britain’s fifth biggest supermarket, which is privately owned by Germany’s Aldi Sud, signaled no let-up for its larger rivals as it reaffirmed a commitment to investing in the UK, despite a low-price pledge hitting its 2018 profit.

“We’re not and never have been focused on short term profits. Our focus is on growth, it’s on sales, stores and customer numbers,” Chief Executive Giles Hurley told reporters.

“Private ownership means we can run the business for the long term, and we don’t have to answer to shareholders. Plans are not going to change. Confidence from our parent company is there,” Hurley added on Monday.

Aldi currently has 840 stores across the UK and Ireland.

Aldi UK reported an operating profit of 197.9 million pounds for the year to Dec. 31, 2018, down from 265.9 million pounds in 2017. Sales were 11.33 billion pounds.

Aldi’s operating margin fell from 2.6% in 2017 to 1.75% in 2018, which analysts at Barclays said was the lowest since 2010. However, as mentioned above, this is mainly result in major investments in new infrastructure.

Germans have changed UK retail

Britain’s food retailing sector has been transformed in the last decade by the march of Aldi and Lidl which has driven down the returns of the big four players and winning market shares from them.

The “Big four” have fought back by trying to narrow the price gap, improving service and chasing greater purchasing power.

Last year Tesco bought wholesaler Booker and launched its own budget chain; Jack’s. Sainsbury’s tried and failed to take over Asda, while Morrisons has struck wholesale deals with Amazon (AMZN.O) and convenience chain McColl’s (MCLSM.L).

Sources: Aldi, Reuters, Retail Gazette i.e.

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