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Lidl has plunged to an annual loss in the UK as the discount supermarket counts the cost of aggressive expansion, higher staff costs and price cuts despite growing sales as shoppers seek bargains.
The German-based grocery chain group reported a loss of £75.9mn for the 12 months to the end of February compared with a pre-tax profit of £41.1mn in the year before.
However revenue jumped 18.8 per cent to £9.3bn with Lidl saying it had served over 1.5mn more customers in the period.
Along with fellow German discount rival Aldi, Lidl has undergone two decades of rapid expansion in the UK as cost conscious consumers look for ways to save on essentials. Between them the pair now control 17.7 per cent of UK grocery market share, according to Kantar. The chains have been boosted by the recent cost of living crisis as shoppers flock to their stores in growing numbers.
Lidl, which controls 7.6 per cent of the grocery market, is now the UK’s sixth-largest supermarket chain. The grocer opened 50 more UK stores during the year, taking its total to more than 960, and also opened its largest ever warehouse this month at a cost of £300mn.
Ryan McDonnell, chief executive of Lidl GB, told the Financial Times that the retailer was encouraged by its performance so far in its current financial year.
Although some analysts believe the discounters are nearing a point of saturation in the UK, McDonnell added that he sees much more room for expansion.
“We see the opportunity to open hundreds more stores here,” he said. “We don’t see any ceiling on expansion plans because we see a lot of road ahead with regards to market share and development.”
However he refused to be drawn on an exact number. Lidl has previously said it wants to have 1,100 stores by the end of 2025.
The cost of expansion weighed on Lidl’s results. The group said that the losses arose from investments as well as a “challenging inflationary environment which led to an increase in costs across the board”. The group said it had cut prices but also added £50mn to its staff bill by increasing wages.