Aldi plans to invest £1.4 billion ($1.7 billion) in the UK over the next two years as the discounter reported profits that tripled in the country, spurred by shoppers seeking to save money on groceries.
(Bloomberg) — Aldi plans to invest £1.4 billion ($1.7 billion) in the UK over the next two years as the discounter reported profits that tripled in the country, spurred by shoppers seeking to save money on groceries.
The grocer will invest in expanding its store and distribution networks, revamping existing stores and improving technology. It’s a boost of £100 million compared with the previous two years’ investments, Chief Exective Officer Giles Hurley said on a call with reporters Monday.
The UK’s cost-of-living crisis has led to a shift in consumer behavior, with shoppers increasingly choosing discount stores to keep their expenditure in check as prices rise. Competitors like Lidl and Asda have also benefited from the shift away from premium brands.
Aldi marked its 1,000th UK store opening earlier this month and is targeting 1,500 over the long term. The grocer has continued to gain market share since it became the UK’s fourth-largest supermarket a year ago, displacing Morrisons.
The German grocer, which opened its first UK store in 1990 and is known for own-brand items, has gained shoppers from even more premium-positioned rivals during the cost-of-living crisis.
“We’re just 33 years into our journey here in the UK and the next few years look to be our most exciting yet,” said Hurley.
Aldi said UK operating profit totaled £179 million in 2022, compared with £60 million a year earlier, when the numbers were hit by pandemic measures. Sales grew by almost £2 billion to £15.5 billion. To be sure, part of the increase in sales reflects rising prices due to stubbornly high inflation.
The results contrast with fellow discounter Lidl, which recently reported that it swung to a £76 million loss in Britain in the year through February, even as it attracted more shoppers and sales rose almost 19%. Tesco Plc and J Sainsbury Plc are expecting retail profit to be broadly flat this year.
Britain’s antitrust regulator cleared the country’s biggest supermarkets of profiteering from high food costs in July, noting that their operating margins have narrowed since the onset of the crisis.
“Profits in grocery are notoriously tight and we’re no exception,” Hurley said. “Our focus is on investing profits in low prices.”
Along with the burden of higher inflation, shoplifting and retail crime have become more prevalent in recent months. The British Retail Consortium recently found that incidents of store theft increased by 27% last year across the UK’s 10 largest cities.
Aldi is trialling body cameras for its staff to see if they can help create a safer working environment, Hurley said. Tesco had already offered cameras to employees earlier this month.
(Updates with investment figure, CEO quotes from first paragraph.)
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