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Aldi UK profit drops despite growth Aldi's UK profits drop for third successive year despite growth
(35 minutes later)
The UK arm of Aldi has revealed its third year of falling profits as the German discounter struggles to maintain its cheaper prices against its supermarket rivals. The UK arm of Aldi has announced a third consecutive year of falling profits as the German discounter struggles to maintain cheaper prices against its supermarket rivals.
The grocery chain revealed a 17% fall in profits to £211.3m in the year to 31 December 2016, from £255.6m the year before despite a 13.5% leap in sales to £8.74bn. The grocery chain reported a 17% fall in profits to £211.3m in the year to 31 December 2016, from £255.6m the year before, despite a 13.5% leap in sales to £8.74bn.
The company said that half its fall in operating margin had been the result of keeping prices low or cutting them, the rest came from investing in new stores and distribution centres as it gears up for future growth. The company said half its fall in operating margin had been the result of keeping prices low or cutting them, the rest came from investing in new stores and distribution centres as it geared up for future growth.
Matthew Barnes, chief executive of Aldi UK and Ireland, said: “Since 1990 when we arrived in the UK our approach as been based on the long game, not short term profit.” He said sales at established stores had risen strongly and “reaccelerated” this year partly as a result of investment to keep prices down, although he would not give a figure. Matthew Barnes, chief executive of Aldi UK and Ireland, said: “Since 1990 when we arrived in the UK our approach has been based on the long game, not short-term profit.”
Barnes said Aldi would do “everything and anything” to keep its prices lower than bigger rivals, indicating that profits might fall again next year. He said sales at established stores had risen strongly and “reaccelerated” this year, partly as a result of investment to keep prices down, though he would not give a figure.
“We will never take our eye off the ball on price. We see that as our contract with our customers,” he said. Barnes said Aldi would do “everything and anything” to keep its prices lower than bigger rivals, indicating that profits might fall again next year. “We will never take our eye off the ball on price. We see that as our contract with our customers,” he said.
Aldi claims to be 15.2% cheaper than Asda, its nearest mainstream competitor making it the cheapest chain in the UK. Barnes would not comment on how Aldi compared to German discount rival Lidl, however. Aldi claims to be 15.2% cheaper than Asda, its nearest mainstream competitor, making it the cheapest chain in the UK. Barnes would not comment on how Aldi compared with its German discount rival Lidl.
But the chain has also been forced to slim its margins to maintain its lead as the likes of Tesco, Morrisons, Asda and Sainsbury’s have all cut prices on basic groceries. But Aldi has also been forced to slim its margins to maintain its lead after Tesco, Morrisons, Asda and Sainsbury’s cut prices on basic groceries.
Inflation in costs since the fall of the pound against the euro and the dollar in the wake of last year’s Brexit vote has also affected costs. Inflation in costs since the fall of the pound against the euro and the dollar after last year’s Brexit vote has also affected costs.
Aldi is enjoying rapid growth in the UK, overtaking the Co-op to become the fifth largest chain earlier this year. The group said it wants to open 70 stores next year, the same number as 2017, in it’s latest phase of growth on the way to a planned 1,000 outlets by 2022. Aldi currently has 726 stores in the UK. Aldi has experienced rapid growth in the UK, overtaking the Co-op this year to become the fifth largest chain. The group said it wanted to open 70 stores next year, the same number as 2017, as part of its plan for 1,000 outlets by 2022. Aldi has 726 stores in the UK. “As others are scaling back we are are most definitely scaling up,” Barnes said.
“As others are scaling back we are are most definitely scaling up,” Barnes said. More than 1 million shoppers had switched to the discounter, helping to double its sales and market share in less than four years, Aldi claimed.
More than 1 million shoppers have switched to the discounter from other chains helping to double its sales and market share in less than four years, Aldi claimed. Barnes said Aldi had universal appeal as shoppers of all ages and demographics were increasingly choosing its supermarkets. “Our growth is accelerating, thanks to the hundreds of thousands of new customers switching their shop to Aldi,” he said.
Barnes said the Aldi now had “universal appeal” as shoppers of all ages and demographics were switching to Aldi from all the major supermarkets. “This is happening right across the UK and it is all down to a simple, straightforward commitment – products comparable to the leading brands and supermarket premium ranges at the lowest prices in Britain.”
“Our growth is accelerating, thanks to the hundreds of thousands of new customers switching their shop to Aldi. This is happening right across the UK and is all down to a simple, straightforward commitment – products comparable to the leading brands and supermarket premium ranges at the lowest prices in Britain.” He said the supermarket was responding to shoppers’ demands by increasing its number of items on sale to 1,800 from 1,500, including new products such as Manuka honey and “courgetti” (courgette spaghetti) as well as more premium lines for Christmas.
He said the supermarket was responding to shoppers’ demands by increasing its number of items on sale to 1,800 from 1,500, including new items such as Manuka honey and “courgetti” vegetable spaghetti, as well as more premium lines for Christmas. Aldi’s best-performing categories over the past year included its Specially Selected range, sales of which rose 40%; fresh fruit, veg, fish and meat also increased strongly.
Aldi’s best-performing categories over the past year included its more premium Specially Selected range, sales of which rose 40% while fresh fruit and veg, fish and meat also increased sales strongly. The retailer’s online wine and non-food business increased sales by 90% after launching last year, selling 2m bottles of wine.
Its online wine and non-food business increased sales by 90% after launching last year, selling 2m bottles of wine.