Discount supermarket chain Aldi is looking to build on its status as the UK’s fifth largest player by continuing to open new stores after posting a double-digit hike in annual sales.
The German-owned retailer, which currently has 840 branches across the UK, said it was still on track to open 100 additional sites in the next two years as it aims to have 1,200 by 2025.
Sales continued to surge as cash-strapped shoppers increasingly switch to discounters such as Aldi and German rival Lidl, with annual sales across its UK stores surging 11 per cent to £11.3 billion.
However, Aldi, which opened its first UK store in 1990, saw its operating profits fall 26 per cent to £197.9 million in the 2018 full year on the back of significant investment. At the pre-tax level, profits were down 18 per cent at £182.2m.
The group said it is looking to more than double its store numbers in London as it moves forward with plans to open more smaller Aldi Local outlets. It said that it plans to increase its number of stores inside the M25 orbital motorway from 45 to 100 by 2025 as it opens new standard-sized and high street-focused Local stores.
The supermarket chain pointed to a significant growth opportunity in the UK capital, where it rolled out its first Local format, in Balham. It said the trial, which involved stores which were half the size of typical supermarkets and stocked only 1,500 product lines, had “exceeded expectations”.
The UK-wide expansion is expected to create some 5,000 jobs over the next two years, Aldi said.
Giles Hurley, chief executive of Aldi UK and Ireland, said: “Every day, thousands of British shoppers are swapping and saving with Aldi thanks to our carefully-selected range of great quality products and our commitment to the lowest prices in grocery.
“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.
“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.”
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.”
The group said it was investing £1bn over the next two years into its stores and distribution centres. It is continuing to roll out its “Project Fresh” initiative – a £300m investment to create more in-store space for fresh, chilled and food-to-go ranges as well as “simpler layouts, improved fixtures and brighter, wider aisles”.
More than half of existing stores have been converted to the new format with the remaining outlets being switched over by the end of 2022.
Aldi said some 280 new products had been introduced this year, “underlining its commitment to innovation and catering for changing consumer preferences”. Those include I Am Vegan Sausage Rolls.
Julie Palmer, partner at Begbies Traynor, said: "The results from Aldi show all the hallmarks of a dynamic business determined to grow market share at the expense of short term profitability.
"While on the surface a drop in profits might be disappointing news for those who thought that increased profits at Aldi were becoming predictable the increase in sales and the promise of further investment across its 840 UK branches mean that these appear to be ‘growing pains’ that show Aldi is determined not to rest on its laurels.
"In the fast moving food retail sector, competitors are desperately seeking methods to win their customers back from Aldi, but this German retail giant has a track record of innovation and being fleet of foot.
"The sum of £1bn is no small amount and keeping the target of 1,200 shops by the end of 2025 shows incredible ambition. But as with any expansion plan the question of whether it can draw enough footfall to fill those extra 360 stores is another question entirely."