Aldi plans $1.7B U.K. investment
Cost-of-living crisis in Britain has led to a shift toward discount grocers
Aldi plans to invest 1.4 billion euros ($1.7 billion) in the U.K. over the next two years as the discounter reported profits that tripled in the country, spurred by shoppers seeking to save money on groceries.
The grocer will invest in expanding its store and distribution networks, revamping existing stores and improving technology. It’s a boost of 100 million euros compared with the previous two years’ investments, CEO Giles Hurley said Monday.
The U.K.’s cost-of-living crisis has led to a shift in consumer behavior, with shoppers increasingly choosing discount stores to keep their expenditure in check as prices rise. Competitors like Lidl and Asda have also benefited from the shift away from premium brands.
Aldi marked its 1,000th U.K. store opening earlier this month and is targeting 1,500 over the long term. The grocer has continued to gain market share since it became the U. K.‘ s fourth- largest supermarket a year ago, displacing Morrisons.
The German grocer, which opened its first U.K. store in 1990 and is known for own-brand items, has gained shoppers from even more premium-positioned rivals during the cost-of-living crisis.
“We’re just 33 years into our journey here in the U.K. and the next few years look to be our most exciting yet,” Mr. Hurley said.
Aldi said U. K. operating profit totaled 179 million euros in 2022, compared with 60 million euros a year earlier, when the numbers were hit by pandemic measures. Sales grew by almost 2 billion euros to 15.5 billion euros. To be sure, part of the increase in sales reflects rising prices due to stubbornly high inflation.
The results contrast with fellow discounter Lidl, which recently reported that it swung to a 76 million euro loss in Britain in the year through February, even as it attracted more shoppers and sales rose almost 19%. Tesco and J Sainsbury are expecting retail profit to be broadly flat this year.
Britain’s antitrust regulator cleared the country’s biggest supermarkets of profiteering from high food costs in July, noting that their operating margins have narrowed since the onset of the crisis.
“Profits in grocery are notoriously tight and we’re no exception,” Mr. Hurley said. “Our focus is on investing profits in low prices.”
Along with the burden of higher inflation, shoplifting
and retail crime have become more prevalent in recent months. The British
Retail Consortium recently found that incidents of store theft increased by 27% last year across the U.K.‘s 10 largest cities.
Aldi is trying body cameras for its staff to see if they can help create a safer working environment, Mr. Hurley said.
Tesco had already offered cameras to employees earlier this month.