Lidl has achieved a remarkable turnaround, reporting a pre-tax profit of £43.6 million this year after a significant £76 million loss previously. This shift is attributed to a significant increase in shoppers, surpassing other UK supermarkets.
Lidl’s surge in momentum is evident as it consistently outpaces rival Aldi, being named the fastest-growing supermarket with a physical presence for the 15th consecutive period, as documented by Kantar. However, the question remains whether Lidl can sustain this success amidst intense competition in the grocery sector.
Matthew Nobbs, a retail consultant with 22 years of experience in managing roles at Lidl, attributes part of this success to the supermarket’s increased efficiency in the past year. He mentions that Lidl has optimised its operating model, ensuring better product availability, which has not only attracted new customers but also enabled it to reopen stores, albeit through an innovative sale and leaseback model now employed by Lidl.
Despite a previous decision to scale back its store opening from 50 to 25 to expand warehouse capacity, Lidl has recently initiated a £70 million sale and leaseback for 12 new stores and plans to open 10 more before Christmas. Richard Taylor, Lidl GB’s chief development officer, asserts that this move exemplifies Lidl’s commitment to expanding its national presence, aiming to provide convenient access for more households.
Chief Executive Ryan McDonnell reflects on Lidl’s journey over the past three decades, highlighting the evolution of its product range and the emphasis on British-sourced goods. He stresses Lidl’s commitment to providing ‘the best value on the market’, which has earned the trust of UK households. According to Kantar data, for the 12 weeks leading up to 3 November, Lidl attracted 326,000 more shoppers, achieving over 35 million additional shopping visits over the year.
Nobbs believes that Lidl’s steadfast ambition for growth and efficient operations will sustain its momentum. He points out the substantial potential for value chains like Lidl and Aldi in the UK, considering their 33% market share in Germany.
Shore Capital retail analysts Clive Black and Darren Shirley predict Lidl’s continued commitment to its core values, featuring a curated product assortment and robust value propositions, will reinforce its position in the UK grocery market. They commend Lidl for its rational approach, improving productivity per square foot and maintaining financial discipline to enhance cash flow.
Aldi, meanwhile, faces challenges in keeping pace with Lidl’s developments. Despite adequate performance, Aldi’s lack of innovation in trading mechanics compared to Lidl’s diverse customer proposition highlights the differences.
Lidl’s bakery section, noted by Kantar as the leading supermarket bakery in popularity, further distinguishes it from Aldi. Nobbs concludes that Lidl’s ongoing expansion and increasing shopper numbers position it for continued triumphs.
Lidl’s significant recovery and strategic growth initiatives mark it as a formidable player in the UK’s grocery landscape. Its focus on efficiency, British-sourced products, and continual store expansion positions it for further success, posing a strong challenge to competitors.
