Aldi UK has released its preliminary FY19 results, for the 12 months ending 31st December 2019, ahead of the impending publication of its full accounts on Companies House. The release show strong sales and profit growth, but a slow down in forecast store openings. We take a look at the results in more detail and consider the retailer's evolution in 2019 and 2020.
Strong sales growth continues and rise in profits
Aldi has attributed the large increase in pre-tax profits in 2019 to "efficiencies of scale offsetting continued investment in prices".
This comes on the back of Aldi's pre-tax profit in 2018 of -25.6%, which was its fourth year of falling profits. Aldi said that this was a reflection of its continuous strategy of maintaining a price gap over other retailers and also investing in its estate, infrastructure and shopping experience.
Slowing expansion, but still on track to meet 2025 target
The retailer has said it expects to open around 100 stores over 2020 and 2021. Typically over the past few years Aldi would have opened between 120 and 140 stores over a two year period, therefore the new forecasts represent a slight slowing down of expansion. Despite this, Aldi looks set to reach its 1,200 stores in the UK by 2025 target, as we estimate it currently has around 900 stores.
Alongside this it will be conducting over 100 store upgrades under the Project Fresh initiative. With the investments Aldi will make in distribution centres and other innovations across the business this will amount to an investment of £1.3bn, a record number for the retailer in the UK.
Evolution continues but low prices remain the main focus
During the 2019 reporting period Aldi continued to adapt its proposition, most notably by introducing a new format; Aldi Local. This allows it to offer a more convenient option in the city environment and increase its London footprint.
In 2020 we have seen evolution continue as Aldi enhanced its ecommerce services by introducing click and collect. Although this is currently limited to one store, the retailer is in the process of rolling out to more.
WWe expect to see the pace of innovation accelerate as the retailer looks to satisfy shoppers changing needs in the new normal following COVID.
So far Aldi has been challenged by the pandemic. Our ShopperVista research has shown that discount stores had a larger drop in usage than other channels throughout the lockdown period. This is primarily due to two reasons;
- The inability to get everything needed in one shop
- Perceived additional challenges in social distancing due to the smaller nature of the format
TThis has resulted in Aldi's continual market share gain slowing down. Its market share is currently at 8%, for the 12 weeks to 6th September, according to Kantar. However, this is a slight decrease on this time last year, when it was 8.1%. 2020 is the first year since 2012 that we have seen Aldi's market share gain slow down. Since 2012 the retailer has gained between 0.6 and 0.9 pp each year.
Despite these challenges we are now seeing shoppers once again revert back to the discounters. With the UK officially entering a recession we are likely to see more shoppers looking for value and adopting savvy shopping tactics in the future, driving continued growth in the channel.
To satisfy this demand during increased economic uncertainty, Aldi has reaffirmed that price will remain remain its number one priority, with CEO Giles Hurley saying;
“With the UK’s economic outlook increasingly uncertain, families are more concerned about their grocery bills than ever. We’ve seen before that our customers need us most in times of financial hardship, which is why our commitment to remain Britain’s lowest-priced supermarket is more important than ever.”
Looking for more insight on Aldi and the discount channel?
Look out for our continue coverage on Aldi's FY19 when the full year results are published on Companies House.
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