Aldi, which just two years ago was promising to revolutionise the UK grocery industry and had Tesco on the run, made a whopping £54.2m pre-tax loss last year, The Grocer can reveal.

Its turnover rose just 1.7% to £2.056bn, despite opening 45 stores in the UK and Ireland, according to new accounts posted at Companies House for the year to 31 December 2009.

It is a remarkable fall from grace for Aldi, which the previous year made pre-tax profits of £92.7m when both sales and pre-tax profits rose by 32%.

The discounter, which normally declines to speak to the press, said the loss was caused by refurbishing stores and admitted for the first time it had started closing old stores.

"We have invested significantly in upgrading all our existing stores and this has had an impact on the 2009 result," said joint MDs Matthew Barnes and Roman Heini, who took over in February. "In addition, we have initiated a disposal programme of older stores and assets surplus to requirements, which alone accounts for more than half the loss. We are confident that our continuing investment programme will lead to both increased turnover and profitability."

In June 2008 Aldi was making headlines by announcing plans to "open a store a week for the foreseeable future" and the term 'The Aldi Effect' was coined by the media to describe companies thriving despite the recession.

But last year the supermarkets hit back by increasing the number of promotions and slashing prices. "Aldi's tertiary branded products struggled to compete against the brands, which had cut their prices in the recession, and people stuck to what they knew," said one retail boss.

Tesco launched its own discounter brands, crowning itself "Britain's biggest discounter". At a time when consumers were drawn to promotions with 40% of products sold on deal in 2009 [Assosia] Aldi offered no temporary price cuts, claiming its lines were already discounted.

In August 2009, MD Paul Foley left. "It wasn't very clear at the time why Foley had gone, perhaps these figures shed some light on it," said one source.

Aldi is still losing customers to every retailer apart from Somerfield and other discounters, according to Kantar 'switching data'. "There was an element of panic in 2008 and the discounters enjoyed a boom, but since then consumers have returned to normal behaviours," said Kantar communications director Edward Garner.

The rise and fall of Aldi 

June 2008: Aldi MD Paul Foley announces plans for "a store a week for the foreseeable future"
Dec 2008: Aldi's sales grow 25% year-on-year [Kantar Worldpanel]
July 2009: Aldi writes to suppliers demanding a 5% reduction in prices
Aug 2009: Foley steps down
Nov 2009: replacement Amin Burger quits
Oct 2010: £54.2m loss reported

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