Never mind the losses, focus on the big picture, says Lidl GB

By James Davey

LONDON (Reuters) – The British arm of German discount supermarket Lidl is focused firmly on long-term opportunity, not short-term profit, it said on Thursday after reporting a 13.6 million pound ($18.6 million) loss for its 2019-20 financial year.

The post-tax loss reflected Lidl’s huge investment in prices, staff, stores, logistics and its supply chain, said the company that arrived in Britain 25 years ago.

The accounts, which revealed revenue of 6.9 billion pounds, are the first to be published since a reorganisation of Lidl’s UK-registered entities.

“We just do things differently. If we’re convinced that we need to spend money now for the long-term gain, we don’t ask ourselves the question: how does this hit our bottom line?” CEO Christian Hartnagel told Reuters.

“We are making every single strategic and investment decision for the long-term sustainability of our business.”

Britain’s food retailing sector has been transformed in the past decade by the rise of Lidl and fellow German-owned discounter Aldi, which have driven down returns at the big four players – market leader Tesco, Sainsbury’s, Morrisons and Asda.

Lidl GB, part of Germany’s Schwarz retail group, invested 1.4 billion pounds between 2019 and 2020 and plans to invest a further 1.3 billion pounds over 2021 and 2022.

Unlike its bigger rivals, but in common with Aldi, Lidl is opening lots of new stores and sees huge potential in the British market.

It opened 51 stores in 2019-20 and is on track to open a further 50 in 2020-21 as it targets a 1,000-strong network by the end of 2023. It currently trades from 840 stores.

“1,000 is not the end,” Hartnagel said, noting that Germany has 3,200 Lidl stores and France has 1,400.

Industry data shows Lidl GB has thrived during the COVID-19 pandemic, expanding its market share to 6.1%. This month it reported buoyant Christmas trading, with sales up 17.9% in December.

It has outperformed rivals even without offering groceries online.

“We have looked at this several times; we just don’t see a profitable route to e-grocery,” said Hartnagel. “We don’t have any immediate plans to launch anything online.”

(Reporting by James Davey; Editing by David Goodman)