Aldi UK profits fall for a third year in a row

Profit from the UK and Ireland arm of Aldi falls by £44.3m as big supermarkets fight back

Aldi's profit take a hit as it plans to have more than 1,000 stores by 2022 (AFP)

Aldi UK and Ireland reported a 17 per cent fall in 2016 operating profit on Monday, a third straight year of decline, reflecting its strategy of maintaining a price gap over larger rivals as well as investment in infrastructure.

Price cutting led by Aldi and fellow German discounter Lidl has transformed the competitive landscape of UK food retailing over the past decade, driving down the returns of the big four players – market leader Tesco, Sainsbury’s, Asda and Morrisons.

The big four have been forced to fight back, reducing their own prices, moving away from multi-buy promotions and improving service.

For the year to 31 December 2016 the British arm of the German discount supermarket Aldi made an operating profit of £211.3m, down from £255.6m in 2015.

Sales increased 13.5 per cent to a record £8.74bn, driven by an aggressive store opening programme which attracted new customers.

Aldi, Britain’s fifth biggest supermarket, currently trades from 726 UK stores, giving it a UK grocery market share of 6.9 per cent, according to researcher Kantar Worldpanel.

It plans to have more than 1,000 stores by 2022.

Aldi said like-for-like sales, which strips out the impact of new space, were “strongly positive” during 2016 and had accelerated in 2017.

“The fact that more and more customers walk through our doors every day of the week gives us the confidence to carry on investing,” said Matthew Barnes, chief executive Aldi UK and Ireland.

Aldi said in 2016 it spent £450m opening new stores and improving its distribution centres in the UK and Ireland, taking investment over five years to £2bn.

Future capital expenditure plans remained “entirely unaffected” by the UK’s decision to leave the EU. It expects to invest £459m during 2017.

Reuters