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Aldi reports fall in profits despite revenues surging to new record

Published 28/09/2015

Aldi said it is accelerating store openings, with 65 sites due to open in the current year, up from 54 in 2014.
Aldi said it is accelerating store openings, with 65 sites due to open in the current year, up from 54 in 2014.

Discount retailer Aldi reported a fall in profits today as the supermarket price war took its toll on earnings despite sales surging to a new record level.

The firm also said it was moving into online sales in the latest headache for more established rivals in the fiercely competitive grocery sector.

Aldi said revenues in 2014 surged 31% to £6.89 billion though operating profits fell 4% to £260.3 million as it created more jobs and kept prices low.

It is accelerating store openings, with 65 sites due to open in the current year, up from 54 in 2014.

Aldi said it was planning to launch an ecommerce website to sell wines by the case from early next year, followed by non-food in the spring. Customers will be offered a home delivery option as well as collection from other locations.

The supermarket said the move "formed part of its long-term growth and investment strategy in the UK".

Chief executive Matthew Barnes said Aldi was maintaining a price gap of at least 15% with rivals on an average basket of goods and offering high quality, driving customers to come back "time and time again".

He added: "Our launch online is another exciting chapter in our story. This will enable us to introduce the Aldi brand and some of our best-selling, best-quality and best-value products to thousands more customers across the UK."

Aldi and discount rival Lidl have seen surging sales in recent years, gnawing away at the market share of more established rivals Tesco, Sainsbury's, Asda and Morrisons, prompting a ferocious price war that has hammered sales and profits at the big four.

The latest surge in Aldi's sales represented an extra £31 million in sales revenue every week in 2014, it said.

German-owned Aldi, which opened its first UK store in 1990, said it had more than doubled sales in the past three years alone. It said its £2 billion balance sheet would underpin continued investment.

The retailer said it created 7,000 jobs last year, and currently employs 28,000.

It now operates 598 stores in the UK and said it remains on course to achieve its target of 1,000 by 2022, recruiting 35,000 more people.

Mr Barnes said: "The past 25 years has been an incredible journey for Aldi in the UK. During that time, the grocery market has changed beyond recognition - and changed for the better.

"At present, there are still 47% of households that don't shop with us. We're hugely excited about the enormous scope for growth over the next 25 years."

Julie Palmer, partner at consultancy Begbies Traynor, said: "Today's disappointing results show that even Aldi can't escape the clutches of the ongoing supermarket price war.

"As its bigger rivals have committed to investing billions of pounds worth of price cuts over the next few years, Aldi has been forced to react in kind, causing its operating profit to fall by 4% last year, compared to stellar profits growth of 65% during 2013 and 124% in 2012.

"Still, the Big Four UK supermarkets could learn a lot from Aldi's business model, which saw the group boost sales by 30% last year, as it continues to appeal to higher value middle-class shoppers.

"And with new online sales channels launching in 2016, Aldi adds yet another string to its bow that will be a major worry to the likes of Ocado, Sainsbury's and Tesco, who have so far been leading the way when it comes to home delivery."

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