Lidl sees profits leap as price-conscious shoppers switch in droves to discounters

Profits at the UK arm of German supermarket chain Lidl have more than quadrupled thanks to rapid expansion and more shoppers switching to discounters.

Pre-tax profits topped £41.1 million in the year to February 28, surging from the £9.8m posted the same time last year. It saw revenues edge up by 1.5 per cent, totalling £7.8 billion in the latest financial year, up from about £7.7bn the previous year. The chain opened 53 stores over the year to February, bringing the total to 918 across Britain. Lidl already has about 100 stores across Scotland.

The retailer, which was named the UK’s cheapest supermarket operator earlier this month by The Grocer, stressed that it would continue to meet its promise to customers of offering the lowest prices in the market. Some 770,000 more people shop with the chain each week compared with last year as people switch their shop to save money, the group said. That amounts to £58m in total spending that shoppers have switched from the established major operators, according to the research.

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However, Lidl cautioned that supply chain pressures have increased the risk of sufficiently meeting customer demand, and that there is “no assurance” that the issues will not worsen in the future, which could further increase costs. And the chain said it has been affected by labour shortages caused by Brexit and following the pandemic.

It also noted that it has seen a shift in consumer habits to more of a focus on healthy eating, which it said presents a risk as it needs to keep up with the trends and change its products to meet them.

Ryan McDonnell, Lidl Great Britain’s chief executive, said: “Our business model is built for the long term and I’m incredibly proud of our continued growth in recent months, which builds on our strong performance across 2021. During this time, we’ve made further investments across all areas of our business, building even more stores and distribution centres, hiring more colleagues, increasing pay rates, investing in our British supplier base and contributing to the communities we operate in. As a discount supermarket we are in the best possible position to support people through these challenging times, and it's our absolute priority that we continue to do so.”

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The group recently increased its staff minimum wage, from £9 to £9.30 per hour outside London and £10.55 to £10.75 within the UK capital, which benefits 19,000 of its around 27,000 strong workforce.

The results come a year on from Lidl forecasting that it would create 4,000 jobs over the coming three years as part of its ongoing attack on Britain’s Big Four grocers - Tesco, Asda, Sainbsury’s and Morrisons. The German-owned retailer expects to reach its target of having 1,000 stores by 2023 and outlined a new ambition for 1,100 sites by 2025. The group, along with fellow German-owned rival Aldi, has been eating into the dominance of major operators such as Tesco. Lidl is privately owned, meaning it does not need to publish regular sales data, unlike stock market-listed retailers.

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Discount supermarket chain Lidl already has about 100 stores across Scotland and is continuing to expand UK-wide.