Aldi is willing to further sacrifice profitability and even if necessary to sustain losses in order to maintain price competitiveness.
Aldi UK and Ireland chief executive, Matthew Barnes, signalled he would not take his foot off the pedal on price, despite a 1.8% hit to operating profits last year as the retailer gave up margin amid the grocery price war.
He said: “It [margin] may decline further but I am absolutely clear we will not be beaten on price. That’s our contract with our customers.”
Aldi’s operating margin fell from a high of 5.1% in 2013 to 3.3% in 2015.
Asked if the retailer would go into the red if necessary to maintain its price differential with rivals Barnes replied: “If losses are an inevitable consequence then yes, but I don’t foresee that on the horizon.”
He maintained that profits in the current year would not necessarily fall: “I’m not flagging that. We are very happy with performance this year.”
Barnes said Aldi’s structure enabled it to be “nimble and adaptable” and to invest in price as much as may be needed. “We’re privately owned,” he said. “We have incredibly supportive shareholders who are here for the long term.”
Although food retail conditions remained “incredibly challenging” in the wake of the price war, Barnes said like-for-like growth was “positive” last year and remained so in the current year.
The rate of like-for-like growth is slower than in the past, but consumer demand is outstripping the capacity of some existing locations.
Total sales in its last finanicial year to the end of December 2015 rose 12% to £7.7bn.
The retailer aims to trade from 1,000 UK branches by 2022 compared with 659 now. Seventy more shops will open in 2017.
Barnes said: “There’s no doubt as we go forward that most growth will come from new stores. Our like-for-likes will be affected by our opening programme – we’ve never suggested otherwise.
“We’re opening in many towns where we need a second store. There is such a thing as good cannibalisation for us.”