Aldi sees sales jump - while price cuts and new stores hit profits

Aldi has seen sales jump to record heights despite profits slipping by nearly a fifth as the supermarket drove investment into cutting prices and expanding its reach.

The German discount grocer said annual sales in the UK and Ireland rose 13.5% to a record £8.7 billion last year, with growth accelerating into 2017.

It added that last year's like-for-like sales growth remained "strong", but declined to give a figure.

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Operating profit was down 17% to £211.3 million due to an ongoing investment drive, which saw it commit £450 million to opening new stores and improving its UK and Ireland distribution centres.

Gross profits fell 7% to £324.5 million for the 2016 financial year, down from £349.7 million in 2015.

Discounters Aldi and Lidl have been a thorn in the side of the Big Four supermarkets, snatching market share by offering cheaper prices.

However, Aldi's UK and Ireland chief executive Matthew Barnes said the group had upped the cost of some products in response to rising inflation from the Brexit-hit pound.

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He said: "Yes we have had to raise prices too, but we are focused on that price gap. Where inflation goes, who knows?

"In terms of the impact on our profits, we are very happy with our performance this year.

"We have manged to create a scenario where our business is leaner then it has ever been and it's cheaper to run than it has ever been. So we remain in a really strong position in 2017 and we will remain so in 2018. We feel stronger than we have ever felt."

Aldi, which employs 29,000 UK staff, enticed more than a million new customers into its stores in the year to September 10, according to industry figures from Kantar Worldpanel.

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The privately owned group said it plans to plough further funds into launching 70 new UK stores and recruiting 4,000 staff next year.

Mr Barnes added: "Our growth is accelerating, thanks to the hundreds of thousands of new customers switching their shop to Aldi.

"This is happening right across the UK and is all down to a simple, straightforward commitment - products comparable to the leading brands and supermarket premium ranges at the lowest prices in Britain.

"We're doing everything we can to insulate customers from those cost increases, making sure our prices are the lowest in the UK, every day of the year."

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As part of its investment, Aldi said it would launch another 150 stores under its £300 million Project Fresh strategy, which aims to carve out more space for its fresh, chilled and food-to-go ranges.

The supermarket group said Britain's vote to leave the European Union had no impact on its investment plans and it would push £459 million back into the business during 2017.

It is also spending £200 million launching three distribution centres, in Sheppey in Kent, Smalley in Derbyshire and Bedford.

Looking ahead, the retailer said it expected to sell more than 2 million bottles of sparkling wine over the festive season and more Christmas puddings than any other retailer.