Financial overview
- Aldi is now the UK’s fourth largest food retailer with around 9.9% of the market, having overtaken Morrisons in September 2022
- Discounter momentum slowing slightly as businesses mature, but Aldi still growing ahead of the market
- Historically an highly profitable business
- For Aldi’s latest financial results, click here
Sales growth at Aldi has been driven by a combination of strong like-for-like growth, which the secretive group declines to divulge, and rapid physical expansion.
Although it has not filed its full results with Companies House yet, in September 2024 Aldi revealed that its UK and Ireland sales increased by £2.4bn (+16%) to £17.9bn in the 12 months to December 2023 (FY2023), which it described as “its highest ever period of sales growth – as British shoppers continued to prioritise value despite falling inflation”.
Sales in the UK and Ireland increased 13.4% to £15.47bn for the financial year to 31 December 2022 (FY2022), from £13.65bn the previous year. Chief executive officer for Aldi UK and IrelandGiles Hurley said: ”Although inflation is easing, households are still under real pressure from higher living costs. As a result, Britain is shopping very differently to how it did 18 months ago – fewer trips, more own label products, and switching supermarkets in search of better value.
“What we’re seeing is a new generation of savvy shoppers who’ve turned their back on traditional, full-price supermarkets in favour of transparent, low prices, which is what we’re famous for. That’s why we’re still welcoming more and more customers through our doors – people who come to us for our low prices but stay for the award-winning quality of our exclusive brands.”
Pre-tax profits in the UK and Ireland have been strong to date, reflecting Aldi’s obsessive control of operational costs, and recovered to £152.6m for the 2022 financial year, having tumbled86.5% year on year to £35.7m for FY2021 due to investment in prices, people and expenses related to the pandemic.
FY2022 profitability was buoyed by the retailer’s focus on cutting “operational costs through greater efficiencies of scale”, even as it continued to invest in price to keep costs down for consumers amid the cost-of-living crisis.
Pre-tax profit margin for FY2022 was 1.0%. This was an improvement on0.3% in FY2021. Commenting on the fall in profits in FY2021, Hurley said:“Preserving our price discount and rewarding our people will always be more important to us than short-term profit. Being privately owned means we can keep our promises even when times are tough.”
Pre-tax profits had also dipped the previous year as Aldi continued to implement price reductions for consumers, and felt the cost of responding to the pandemic, slipping 2.5% to £264.8m, with a slightly reduced pre-tax margin of 2%.
Margins had declined sharply from 4.9% in 2013 to just 1.6% in 2018 as a result of investment in price, but also improved to 2.4% in 2019 as the company claimed that one million UK shoppers switched to Aldi.
Investment in its stores and distribution capability remain key to growth. In October 2023, Aldi pledged £1.4bn investment over the two-year period of 2023 and 2024 into expanding its distribution and store network, improving existing stores and the technology infrastructure to support growth.
The retailer files combined accounts for the UK and the Republic of Ireland under Aldi Stores Ltd.
Aldihas been growing at a phenomenal rate in the UK and, alongside fellow German discounter Lidl, has brought about a transformation in the food sector, which has resulted in the big four struggling to hold market share for some time.
And in September 2022 it brought the era of the traditional big four supermarkets to an end when Aldi overtook Morrisons in terms of grocery share for the first time.
Aldi’s sales were up 14.9% in the four weeks to 1 October 2023, taking it to a market share of 9.9%, up 0.6 percentage points, according to the latest Kantar grocery market share data.
However, May 2024 marked the third month in a row in which Aldi’s growth had slowed, according to Kantar. Its share stood at 10%, down from 10.1% the previous year. This came at a time when Lidl had notched up its nine month in a row as the fastest-growing bricks-and-mortar supermarket, helped by its loyalty app and personalised discounts.
UK sales and like-for-like sales analysis
Aldi has experienced phenomenal growth over the past five years and continues to improve its top line well ahead of the market.
Aldi does not file separate accounts for the UK operation, this being combined with the Republic of Ireland for reporting purposes under Aldi Stores Ltd.
Its UK and Ireland business, operating under Aldi Stores Ltd, reported sales growth of 13.4% to £15.47bn in the year to 31 December 2022, as people sought lower prices amid the cost-of-living crisis.
There was a 29% rise in sales of its Specially Selected range in the 12 weeks to 26 September 2022 as shoppers switched from more expensive supermarkets as they sought out ”more affordable, premium quality food”.
Based on Kantar Worldpanel data, and growth in UK and Ireland sales, Retail Navigator estimates that Aldi’s UK retail sales increased by around 13.5% from £11.45bn to £13bn in 2022.
Aldi does not comment on its like-for-like performance, but insists same-store sales continue to expand “strongly”. Like-for-likes would have been well into double digits for several years up to 2015, but are likely to have dropped into single digits since then as the business matures.
UK profit analysis
Following several years of steady improvement, Aldi’s profit margins have come under pressure since 2014, as the discounter steps up investment in people, price and expansion. This trend had been reversed in 2019 as the retailer gained new customers and focused on its profitability model.
However,pre-tax profit for the UK and Ireland slumped in FY2021 owing to investment in prices, people and expenses related to the pandemic.
Yet despite continuing to invest in price to keep costs down for consumers as they contended with rising costs of living, Aldi’s profitability improved in FY2022 on the back of efforts to reduce “operational costs through greater efficiencies of scale”.
Pre-tax profit came in at £152.6m with a pre-tax profit margin of 1.0% for FY2022, compared to a pre-tax profit margin of 0.3% the year before.
Aldi Stores Ltd – covering both the UK and the Republic of Ireland – had been loss-making as recently as 2009 but returned to profit the following year after 30 apparently underperforming stores were closed.
Meanwhile, the phenomenal sales growth from 2011 was accompanied by steady improvement in margins over the following couple of years.
Aldi Stores Ltd operating profit almost trebled from £60.2m in FY2021 to £178.7m in FY2022, with a margin of 1.2%. Aldi noted ”the year-on-year increase was due to an exceptional prior year when its profit margin fell to an 11-year low of 0.4% following significant investment in Covid-related measures”.
After three consecutive years of decline, it had seen operating profit jump 25.8% in 2017. This fell back 26% in 2018, coming in at £198m against £265.9 the previous year. Although in 2019 operating profit jumped back by 49% to £291.2m as the retailer saw customers switch from other retailers, it slipped again by 1.2% in 2020.
Ecommerce sales performance
Aldi has given limited detail about the success of its small-scale online operation in the UK.
In terms of sales, the ecommerce platform is likely to make a fairly small contribution to Aldi’s UK revenues. This had been growing as it ramped up capability, increased range and trialed new services.
However, the decision to stop selling wine and spirits online for home delivery from early 2023, and from later in the year to also halt the sale of Specialbuys online for home delivery is likely to see online share of total sales decrease.The grocer’s online wine and general merchandise endeavour was likely to have been profitable, with the case-only option for wine meaning average order values were likely to have been relatively high.
Recent online growth will also be impacted by people’s return to stores post pandemic.
UK stores financial analysis
Aldi has continued to invest to expand its UK presence, with a strategy of ongoing rapid expansion as it bids to gain further traction among British consumers.
The retailer pledged to invest£1.4bn over 2023 and 2024 into expanding its distribution and store network, improving existing stores and the technology infrastructure needed to support growth.
It had already invested£1.3 billion over 2020 and 2021 as it celebrated 30 years in the UK, with new and upgraded stores, distribution centres and further innovations across its business.
In September 2021 it went on to pledge a further £1.3bn over the next two years (2022-2023) to create “more places and more ways to shop with Aldi”.
The retailer said it would continue to expand its retail estate with 100 new stores across the UK over the next two years, as well as growing its logistics infrastructure, including a new 1.3m sq ft site in Leicestershire.
It is also investing more into its click-and-collect service and technology initiatives to support further growth.
Aldi’s ambitious expansion programme took the discounter’s estate to around 995 UK stores as of late 2023.
In addition to new openings, the grocer is also investing in refreshing existing shops. A major focus of the investment will be on the expansion of its presence within the M25.
On the back of Aldi’s phenomenal sales growth, sales densities (sales per sq ft) within its UK stores have outperformed grocery rivals over the past few years.
While market leader Tesco’s sales are shifting to online channels, Aldi is experiencing greater maturity of its retail space. Retail Navigator estimates that sales densities were around £1,660 per sq ft in 2022.
Group financial analysis
Notoriously secretive, Aldi reveals few details of its financial performance as a group. But alongside greatly improved trading in the UK, the retailer is also known to be experiencing strong sales growth across its global network.
Group sales were estimated to reach around £101.5bn for FY2022.
Current financial year
FY2023
Aldi UK revealed, in September 2024, that sales increased by £2.4bn (+16%) to £17.9bn in the 12 months to December 2023 (FY2023), which it described as “its highest ever period of sales growth – as British shoppers continued to prioritise value despite falling inflation”.
Pre-tax profit grew to £536.7m in FY2023, from £152.6m the previous year, as a result of record sales and greater efficiencies across stores and central functions. Reported operating profit came in at £552.9m in FY2023, with a margin of 3.1%.
Christmas 2023
Aldi reported a record trading period for Christmas 2023, with sales of more than £1.5bn for the “first time” in the run-up to the big day. Sales were up 8% year on year for the four weeks to 24 December. Hurley committed to further price cuts in the new year.
Employees
Aldi’s rapid expansion in the UK and Ireland is reflected in a dramatic increase in headcount.
Aldi Stores Ltd, which operates the business in the UK and Ireland, employed more than 44,500 staff in 2022, compared to 12,000 in 2012 and just under 6,000 two years before that.
Despite rapidly increasing sales, Aldi’s hike in headcount meant that sales per employee came under pressure in recent years.
Sales per employee have fallen from a peak of almost £373,000 in 2011, and came in at more than £347,000 in 2022.
Aldi’s obsessive control of costs saw staff costs as a proportion of sales reduced to 6.8% in 2013.
Staff costs have soared every year since, however. They jumped by another 5.5% to £1,232.1m in 2022, meaning that staff costs represented some 8.0% of UK sales.
Aldi’s staff costs to sales ratio does remain very modest given that salaries and hourly rates of pay have historically outstripped those offered by almost all of its grocery rivals.
Forecast
Although Aldi doesn’t give much away in terms of its group performance, Retail Navigator expects Aldi’s strong global sales trajectory to continue as it continues to gain market share.
It had been upping its game in the online delivery space, which was an opportunity to bolster sales. However, Aldi’s winding down of its home-delivery service for its general merchandise Specialbuys and wines and spirits in 2023, as it puts its energy into keeping prices low and expanding its store portfolio, will limit its growth online.
Retail Navigator expectsAldi’s group sales to edge over the £142bn mark by 2027.
Indeed, Retail Navigator anticipates that sales for the UK and Ireland could be around the £22bn mark by 2027.
