Lidl’s British business fell £25m into the red last year despite ringing up strong sales growth after it invested in opening new shops in the UK.
The company, which has 800 outlets in England, Scotland and Wales, said the losses followed investment of £654m in 51 new stores, the extension of 13 more sites, and the opening of a new distribution centre in Motherwell, Scotland.
The business made a pretax profit of £19m a year before, but that came before a restructuring which combined the group’s store operations and property management into one company.
Lidl, which employs nearly 26,000 staff, will invest £1.3bn this year and next with a plan to open about 50 more new stores in 2021 and shift to a new British headquarters in Tolworth, south-west London, and build a new warehouse in Luton. The company also plans to install 300 electric car charging points in its car parks by 2022 and is installing solar panels on new freehold stores.
Christian Härtnagel, the chief executive of Lidl GB, said the retailer would not be investing in home delivery despite a surge in demand for online grocery ordering during the pandemic.
Online grocery sales have grown to account for nearly 14% in the UK market as a whole, up from just over 7% a year ago, as health concerns have prompted shoppers to order from home. But Härtnagel said he thought families would not continue to buy as much online once fears of the virus had subsided.
“Its been an absolutely unprecedented year and nothing about 2020 was normal. A lot of people are talking about a new normal but I fundamentally disagree,” he said.
“[Online grocery shopping] may not go back to 7.5% but even if it is going to be 10% it is still absolutely OK for a discount retailer to focus on the 90% of the market that is [in] bricks and mortar [stores]. There is so much more potential in opening stores up and down the country. We are not entertaining any thoughts to go into e-grocery.”
He said Lidl was instead investing in keeping prices lower than its competitors, opening stores and its loyalty app, Lidl Plus, which offers perks including discount vouchers if shoppers spend over a certain amount each month.
The German discount chain said it booked sales of £6.9bn in the year to 29 February 2020. While it could not provide a comparable figure from the previous year after the company reorganisation, data from the market analyst Kantar indicates that sales rose by more than 9% during the year, making it one of the UK’s fastest-growing grocery chains.
Like almost all the grocers, Lidl has seen sales growth rise since then as families have been forced to cook more at home because restaurants, cafes and canteens in many schools and workplaces have been closed during the pandemic.
Sales rose by 18% in the four weeks to 27 December, compared with the same period a year earlier. The increase was larger than those at the UK’s four biggest supermarkets – Tesco, Sainsbury’s, Asda and Morrisons – and Aldi.
Härtnagel said: “Our driving focus remains on offering customers the best quality products at the lowest prices in the market.
“We are confident in our strategy and see huge potential in the market long-term and will continue to hire more colleagues, invest in British suppliers, open more stores and become an integral part of more communities.”
