Kantar: Lidl leaving room to grow in new stores

Although the German hard discounter Lidl is building U.S. stores nearly three times the size of counterpart Aldi, Lidl is likely to build its breadth of merchandise inside them gradually, utilizing less floor selling space for new stores until consumers get used to its offer, according to a research report by Kantar Retail.

The gradual increase would provide Lidl's new stores with a built-in means of increasing sales over time, according to Mike Paglia, a Kantar director who authored the report. Kantar based its findings in part on how Lidl has operated in other countries.

"Lidl is taking a unique, phased approach to how it will deploy its square footage," Paglia said. "When a new Lidl store opens, approximately 12% to 15% of the selling square footage will go unused. This Phase 1 store is meant to suit the needs and preferences of its new U.S. shoppers and give them an opportunity to get comfortable with the store. In time, Lidl will switch over to Phase 2 stores, which use all the available space and feature a modified layout."

Lidl US, a division of Germany's Schwarz Group with offices in Arlington, Va., is expected to open its first U.S. stores sometime in 2017. A spokesman for the chain declined comment on the Kantar report, which also included projections of sales volumes and store opening cadence.

Mike Dawson, a journalist following Lidl from Frankfurt, Germany, told SN he was skeptical that Lidl would intentionally underutilize space. "The German discounters are driven by a ruthless drive towards efficiency and unproductive sales space is just not their thing," he said.

According to Kantar, early Lidl stores will average about $10.9 million in sales per store in their first year, but that figure would grow over the coming five years to a projected $15.2 million, a compound annual growth rate of 6.9%. Sales per square foot would jump from $473 to $562 over the same period, Kantar added.

Should Kantar's projections be accurate, Lidl would be a higher-volume, but less productive version of Aldi. The latter operates stores with average annual volume of about $9 million per store and sales per square foot of $795, Kantar said.

Although Lidl has not specified a precise opening date or number of stores it intends to open, Kantar said it expects approximately 100 openings per year for the next five years.