Lidl GB spent more on price cuts than it earned in pre-tax profit

Lidl's growth came at a published price. It spent £315m on price cuts and promotions, including its "pick of the week" product ^[2], against pre-tax profit of £245.5m ^[22]. The spending was about 1.3 times what it made before tax ^[16]. On sales of more than £13bn ^[1], pre-tax margin comes to no more than about 1.9% ^[20]. The price investment comes to at most about 2.4% of sales ^[21].

The profit figure needs a second look. The Guardian reports a 30% rise to £245.5m from £156.8m ^[22]. Those two numbers imply a rise of about 57% ^[15], and a 30% rise from £156.8m would land near £204m ^[19]. One of the published figures is wrong. Until it is corrected, Lidl's margin trend could be a steady climb or a steep one.

On this record, Lidl does gain from shoppers moving in both directions. Shoppers sought out cheaper fresh meat, fruit and vegetables ^[8], with annual in-store food inflation rising to 1.5% in August from 0.9% in July and fresh produce at 3% ^[9]. At the other end, "Deluxe sales are up 12% as more households dine in rather than eat out," said Ryan McDonnell, Lidl GB's chief executive. "Customers are looking to trade up and treat themselves at home." ^[10]

The two directions are not the same size. Deluxe grew 12% against 10% for the business ^[10][1], a gap of two points ^[18]. Lidl did not disclose Deluxe's share of sales, so the premium half of the case cannot be sized, and its link to eating out less rests on McDonnell's word. In my view the double gain holds for Lidl, with the trade-down half much better evidenced.

Aldi has slowed while Lidl grew. Its growth eased as Tesco and Sainsbury's offered more savings through loyalty schemes and ranges that match Aldi on price ^[12]. Lidl moved toward that model, with Lidl Plus participants up 23% ^[5]. Clive Black, vice-chair at the broker Shore Capital, set that against Aldi, "where management has a clear strategy to deride such programmes" ^[13]. Aldi is the only big UK supermarket chain without a loyalty scheme ^[6].

Giles Hurley, the boss of Aldi UK, makes the skeptic's case. He told BBC News that discounts were helpful "when they're real and when they show realistic reductions," and criticised reductions he said "dupe customers" ^[7]. The UK's competition watchdog examined supermarket loyalty pricing in 2024. It found that shoppers "almost always make a genuine saving" ^[14].

Lidl's lead over Morrisons is narrow. Its 8.6% share in the 12 weeks to 17 May, from Worldpanel by Numerator ^[3], sits 0.3 points above Morrisons' 8.3% ^[4][17]. Part of the discounters' rise came from slower performance at Asda and Morrisons after both were bought in debt-funded private equity deals ^[11]. This quarter, Lidl's choice is whether to keep spending more on price than it earns before tax. Next quarter, that spending is what defends a 0.3-point lead over a rival whose weakness helped create it ^[11][17].