Aldi UK plans 130 new stores in next two years as profits rise

An Aldi shopping bag is seen in a cart at a superstore in London, Britain, September 29, 2018. REUTERS/Peter Nicholls

LONDON (Reuters) – The British arm of German discount supermarket Aldi reported its first rise in annual operating profit for four years on Monday and signalled no let-up in its approach with plans to open 130 stores in 2019 and 2020.

The investment in new stores and in new and existing regional distribution centres would create 5,000 jobs, it said.

Aldi is Britain’s fifth biggest supermarket and holds a market share of 7.6 percent, the latest industry data shows. Its larger rivals are market leader Tesco (LON:TSCO), Sainsbury’s, Asda and Morrisons.

It currently trades from about 775 UK stores and plans to have over 1,000 by 2022. It opened 70 stores in 2017 and is on track to open 70 in 2018.

For the year to Dec. 31 2017, Aldi UK and Ireland made an operating profit of 265.9 million pounds, up 26 percent from 211.3 million pounds made in 2016.

Sales rose 16.4 percent to a record 10.18 billion pounds.

The firm said it attracted 15.8 million customers, an increase of 1.1 million.

“While other grocers introduced more complexity into their businesses in their struggle to win back customers, we stuck to our guns and focused on doing what Aldi does best – buying smart, staying lean, improving quality and keeping prices low,” Chief Executive Giles Hurley said.

Britain’s food retailing market has been transformed over the last decade by the rise of privately owned budget chains Aldi and Lidl, which has driven down the returns of the industry’s big four players.

The big four have fought back by cutting their own prices and improving service. They have also sought greater buying power through consolidation with Tesco purchasing wholesaler Booker for nearly 4 billion pounds earlier this year and Sainsbury’s agreeing a 7.3-billion-pound takeover of Walmart’s Asda.

Tesco is also taking on Aldi and Lidl at their own game, launching the Jack’s discount format last month.

However, the big four are still losing market share to Aldi and Lidl who are opening new stores at a rapid pace and attracting customers with more premium ranges.

Aldi’s “Speciality Selected” premium range now generates over 1 billion pounds annually, with products such as Aberdeen Angus Beef and Oliver Cromwell Pink Gin.

Combined, the two discounters have 13.1 percent of the UK grocery market and analysts forecast it will be 15 percent by 2020.

Aldi UK also said it was actively looking to source more products from Britain by expanding its UK supply base.

It already sources its core range of fresh meat, eggs, milk, butter and cream from British suppliers, as well as mushrooms, potatoes and seasonal spinach.

($1 = 0.7676 pounds)