Thursday, 29 September 2022

Profits Slide At Aldi But Pledges To Prioritise Lower Prices Over Short-Term Gains

Aldi saw its profits slump significantly last year due to rising costs and investment in pricing. However, the discounter stated today that it was willing to sacrifice margin to maintain its focus on “providing the lowest grocery prices in the UK” amid the worsening cost-of-living crisis.

Over the year to 31 December 2021, Aldi’s operations in the UK and Ireland saw pre-tax profits fall 86.5% to £35.7m on sales up 0.9% to £13.65bn.

Aldi cited Covid-related costs, increasing staff pay and investment in prices. The small increase in sales came after the chain missed out on the online grocery boom during the pandemic.

“Preserving our price discount and rewarding our people will always be more important to us than short-term profit,” said Giles Hurley, CEO Aldi UK and Ireland. “Being privately owned means we can keep our promises even when times are tough.”

Aldi attracted 1.5 million extra customers over the past 12 weeks vs 2021 from supermarkets. This helped boost sales of the discounter’s Specially Selected own-label range by 29%.

Kantar showed sales growing at 18.7%, overtaking Morrisons to No 4

Aldi buying teams were “working tirelessly to counter the impact of inflation and maintain its discount against traditional full price supermarkets”.

Aldi has over 970 stores, plans 16 more in the UK by 2023, to its target of 1,200 by 2025.

Other investment – part of its ongoing £1.3bn two-year pledge – will include expanding/relocating dozens of existing stores + developing its distribution centres and technology infrastructure.

Re cost-of-living crisis, Hurley said: “It’s also a time when Aldi comes into its own. From our carefully selected range to our smaller format stores to our trademark efficiency, we can leverage our unique approach for the benefit of all of our customers.

“We will do whatever it takes to maintain our discount to the traditional full-price supermarkets and keep grocery prices as low as possible..”

Unlike the big gains by discounters in 2008, Mults are price-matching discounter key lines and introducing expanded budget ranges.

Hurley said their private ownership allows a longer view and huge global buying power.

Also, Aldi’s efficient business model can insulate customers vs rising prices across the food supply chain.

Re how much profit margin Aldi will sacrifice in 2022 to protect shoppers, Hurley said: “We always make value the cornerstone of our business. No matter what it takes.”

NamNews Implications:
  • Aldi are able and willing to take a profit-hit to grow share…
  • …as they continue to operate ‘on a roll’ in the UK.
  • And given that they rarely sacrifice share gains…
  • …not a bad strategy.
  • Suppliers and retail rivals need to watch for Lidl pursuing similar policies.
  •  Aldi and Lidl can afford to run at a loss, supported by their global operations…
  • …for as long as it takes!
#Aldi #DiscounterShare #CostOfLiving

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