Aldi has revealed a steep drop in UK profits but said that customers were switching to the discount supermarket chain “in their droves” from higher-cost rivals as the cost of living crisis bites and shoppers look for lower prices.
The German-owned retailer said that 1.5 million extra customers had visited its UK stores over the past 12 weeks, even as it revealed annual pre-tax profits for 2021 slumped to £36m, compared with £265m in 2020 – an 86% decline.
Supermarket profits held up during the coronavirus pandemic, with essential retailers allowed to remain open throughout even if lockdowns caused them to bear extra costs. In 2021, however, Aldi said profits were hit by a bigger wage bill and its efforts to keep prices lower, as well as continued pandemic-related costs.
Giles Hurley, Aldi’s chief executive, said the company was not “immune from the challenges” 2021 had presented. Yet the company sees an opportunity to grow its market share during the cost of living crisis.
“Shoppers are shifting in their droves and coming to Aldi,” Hurley said. He said lower prices were the key factor, while customers were increasingly looking for cheaper own-label versions of product rather than more expensive brands. Hurley said it was an “unprecedented move”.
Aldi, which does not stock many external brands, said there had been a 20% increase in sales of its own-label baby brand, and steep increases in sales of its beauty, meat and poultry products as well.
Earlier this month Aldi overtook Morrisons to become the UK’s fourth largest supermarket for the first time, behind only Tesco, Sainsbury’s and Asda in terms of market share, according to data from the market research company Kantar.
Hurley said, however, that the “big four” was “a club we’ll never be part of”, with “big shop floors, big brands and big prices, frankly”.
When asked if the company would consider running at a loss to stay cheaper than competitors, he said: “We’ll do whatever it takes. Price is the cornerstone of our business. It’s unbreakable.”
Analysts are this year looking warily ahead to the Christmas period, traditionally the “golden quarter” for retail sales. The Bank of England said last week the UK was already in recession, and consumers are expected to have less to spend because of inflation – which could be worsened by a record low for the pound against the dollar on Monday – and rising interest rates.
Hurley said it was difficult to predict how Christmas would pan out in part because of the unusual timing of football’s World Cup, due to take place in winter for the first time because of the climate in the host country, Qatar.
“If one of the home nations performs it could make for a really interesting celebration,” Hurley said. “I’m actually very confident that the public will celebrate this Christmas.”
