Discount Retail Chain Aldi UK & Ireland (German family owned) has fallen short of an estate growth target thanks to unforeseen challenges, the retailer’s UK & Ireland CEO Giles Hurley has acknowledged.
The discounter was aiming to have 1,000 UK stores by 2022 but currently has only about 970, with another 16 to be opened this year. Hurley said the 1,000-store milestone would not be reached until 2023, thanks to challenges including availability of sites.
“There are of course lots of things beyond our control when it comes to the store opening programme,” Hurley told The Grocer. “Clearly there’s planning, which I have to say has been more challenging than ever during the course of the last two to three years, which I guess is perhaps to be expected because of all the pandemic-related challenges. “There is of course a little bit around availability of sites. There are definitely more challenges around construction and materials. I think you would hear the same things from most businesses right now, which is that the economic landscape is just making it a bit more difficult than we would have foreseen. Having said that, it’s slowed us down, it’s not going to stop us. We’re going to open 1,000 stores. It’s going to happen at some point next year. We’re at the moment trying identify exactly which store it will be.”
Aldi is not the only supermarket to have store openings disrupted by planning permission complications. In February, Iceland MD Richard Walker said nearly every store the business opened was subject to lengthy planning delays thanks to under-resourced local councils and overcomplicated rules.
Aldi has the added challenge of its ambitious estate growth targets, which have required opening about 50 new stores a year. Property experts have forecast it will be 12 to 24 months late in hitting a longer-term target of 1,200 stores by 2025 as it competes with Lidl over a diminishing pool of suitable locations.
Speaking as Aldi announced its 2021 financial results this morning, Hurley said it continued to work towards the 2025 target, and was aiming for about 50 new openings and relocations next year. However, to get to 1,200 by the start of 2025, Aldi now needs to open more than 100 stores a year, double its pre-pandemic growth rate.
A further challenge comes in recruiting enough staff for the stores, in an increasingly competitive labour market. Both Lidl, which has its own ambitious estate growth target and Aldi have twice raised entry-level hourly pay rates this year. Lidl’s latest rise, announced last week, puts its national rate for shopworkers above Aldi’s, at £10.90 (US$11.66) an hour versus £10.50 (US$11.23).
Hurley said Aldi would review pay again before the end of the year. The trading update revealed Aldi suffered a near 80% drop in operating profits in 2021 in the UK as sales flatlined ahead of a strong rebound in growth in 2022. Sales edged up 0.9% to £13.65bn (US$ 14.7bn), accompanied by a 79% drop in operating profits back to £60.2m (US$ 64.4m) from £287.7m (US$ 307.8m), blamed on investment in prices, people and pandemic-related expenses. However, Aldi had attracted 1.5 million extra customers to its stores over the past 12 weeks, the update said.
The discounter overtook Morrisons to become the UK’s fourth-biggest supermarket in Kantar’s latest 12-week data to 4 September, with a market share of 9.3%, up from 8.1% a year earlier. Hurley said that despite the market shift, Aldi would never see itself as one of a new big four. “I think there is still very much a big four,” he said. “Big shop floors, big brands and big prices, frankly. That’s a club we will never, ever be part of and that’s why shoppers are switching shopping habits in their droves and coming to Aldi.”
He said that as well as opening and relocating stores, Aldi was expanding existing ones.
“Our relocation programme is extensive. The results have been particularly positive and we’ve seen that recently, whether it’s our relocated store in Bangor or our relocated store in Haddington up in Scotland.
He said the latest ‘project fresh’ format benefited from “a larger shop floor, wider aisles, better lighting and self-scanning tills all developments which are seeing those stores perform at a significantly higher level than the stores they replaced”.