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How to Invest in Aldi or its Competitors

Jimmy Khan

Jun 17, 2022 16:58

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Aldi, a small-box discounter, is the fastest-growing grocery chain in the United States. Aldi USA now runs over 2,000 stores across 36 states, with ambitions to establish 2,500 more and grow into additional states by 2022. Since 1976, when they built the first Aldi in the United States in Iowa, they have had phenomenal development. Kroger, on the other hand, was founded in 1883.


Aldi has surpassed Amazon's well-known Whole Foods Market to become the ninth-largest retailer in the United States. In January 2022, Whole Foods was the tenth biggest retailer in the United States.

Aldi Stock

Investors cannot own shares in Aldi, even though it is one of the fastest-growing stores in the United States. Aldi is a family-owned company that does not need outside funding to expand or sustain operations. All the stock is owned by the Albrecht family, which is believed to be worth more than $50 billion.

ALDI Stock Symbol

Aldi does not have a stock ticker or symbol since it is not publicly traded on any stock market in the United States or Germany, where it was founded.


Financial data for Aldi is hard to come by. However, Food Industry predicts Aldi USA's 2020 sales to be $15 billion. It's easy to understand why so many investors look for the Aldi ticker symbol, which doesn't exist.

Will there be an IPO for Aldi?

Aldi is a privately owned corporation with a management team that has never been interested in going public (IPO). Aldi is one of the world's biggest privately-owned retailers, and there will be no IPO under the existing ownership. Due to its profitability and unique competitive edge as a supermarket discounter, an IPO would undoubtedly be much anticipated by investors.


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What exactly is Aldi?

Aldi is well-known for its cheap pricing and uncompromising efficiency. Aldi saves money by running fewer shops and hiring small teams of employees. Aldi is well-known for using a vending machine to charge clients for shopping carts. Customers pay $25 for carts and get a quarterback if the cart is returned. Hire-for-carts is a concept that eliminates the need to pay an employee to collect carts from the parking lot.


Aldi similarly saves money by charging for plastic and paper bags, and customers are encouraged to bring their bags, which lowers prices. Every supermarket in Europe charges a deposit for shopping carts as well as a charge for backs.


Aldi's label goods account for more than 90% of its merchandise. Aldi can keep costs low by focusing on private label products rather than major brands.

How does Aldi maintain its low operating costs?

Aldi maintains smaller shops and offers fewer items than traditional supermarkets, in addition to focusing on private brands.


The average Aldi store is just around 17,000 square feet*, while the average Kroger supermarket is 100,000 to 150,000 square feet. Aldi may save expenses by hiring fewer people because of its modest size.


Aldi also saves money by stocking fewer items. Only 1,400 of the most popular groceries and other goods are sold at a typical Aldi shop, and over 225,000 goods may be found in a Kroger Marketplace supercenter store.


Adli's operations and logistics are simplified by limiting stock. Many consumers like the restricted inventory and tiny store since it allows them to shop quickly and easily.


Despite its cheap costs, Aldi's items are known for their outstanding quality. Adli's goods, for example, do not include certified synthetic colors, added MSG, or partly hydrogenated oils.


Over 400 medals for quality have been given to Aldi private-label items. Aldi offers several organic items and conducts over 30,000 taste tests yearly in its test kitchens. Aldi's Aldi Finds discount program offers a wide range of items in addition to food.


According to CNN, Aldi's discounting has impacted established store chains and has scared Walmart officials. In the United States, Aldi has a large Midwest presence and has recently expanded into California.


Aldi, according to CNN, has a cult-like following because of its cheap costs and great quality. The AldiNerd.com Community, a Facebook community for Aldi USA, has over 1.3 million members. Because of the company's reputation, grand openings for new Aldi locations sometimes draw enormous crowds.


In several US cities, Aldi now offers Instacart delivery services. Because Instacart's personnel select and pack groceries items and transport them in their cars, partnering with Instacart lowers Adli's expenses.


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Who is the owner of Aldi?

The Albrecht family of Germany owns Aldi in the United States. Albrecht Diskont, or "Albrecht Discount," is the acronym for Aldi. The Albrechts own two cheap grocery stores in Germany: Aldi Nord and Aldi Sud. Aldi Nord owns the renowned Trader Joe's bargain store business in the United States, whereas Aldi Sud owns Aldi USA.


Both Aldi brands have approximately 10,000 locations in 16 countries. Outside of Germany, the United States is Aldi's biggest market. Other important Aldi markets include the United Kingdom, where Aldi has competed against Tesco in its home market.


In British markets, not even Walmart (WMT) has been able to compete with Tesco. According to Supermarket News, Walmart quit the UK by selling its controlling stake in the British supermarket Asda Group in October 2020.

Three Ways to Invest in Aldi's Rivals

Mr. Market, fortunately for investors, provides a variety of Aldi options. As an Aldi substitute, there are other huge grocers and discounters.

Kroger (NYSE: KR)

Kroger (KR), America's biggest freestanding supermarket, is not inexpensive, but it provides tremendous value.


Warren Buffett is a believer in Kroger's worth. According to CNBC, Berkshire Hathaway (BRK.B) held 24.978 million Kroger shares on September 30, 2020. Kroger is a value investment for Buffett since it is large yet inexpensive.


On February 5, 2021, Mr. Market paid $33.15 for Kroger shares. Despite this, according to Statista, Kroger operated 2,757 grocery shops in 35 states and the District of Columbia in February 2020. Kroger also owns 35 food manufacturing facilities, 45 distribution centers, 1,585 supermarket gasoline stations, and 170 fine jewelry shops.


In the United States, Kroger and Ocado Group PLC (LON: OCDO) aims to develop ten Customer Fulfillment Centers (CFC). Robots will pull and pack supermarket orders for customer delivery in CFCs, which are automated warehouses.


Customers' goods will be delivered to their houses via contractors such as Instacart. According to Supermarket News, Ocado and Kroger are constructing CFCs in many of America's greatest cities, including Chicago, Dallas, Atlanta, and Washington, DC.


Among Kroger's well-known supermarket brands are Ralph's, King Soopers, Fred Meyer, City Market, Baker's, Dillons, Harris Teeter, Smith's, and Fry's. Kroger also owns and runs a large number of stores under the Kroger brand. Kroger owns the Vitacost vitamin brand, the Little Clinic medical clinics, and the Home Chef food delivery service.


Kroger is profitable; on October 31, 2020, it reported $29.732 billion in quarterly sales, $6.822 billion in quarterly gross profit, and $792 million in quarterly operating income. Kroger's profits are sometimes much higher. On April 30, 2020, Kroger announced quarterly sales of $41.549 billion.


Kroger is a rapidly expanding firm. Kroger's sales climbed 6.25 percent in the quarter ended October 31, 2020, according to Stock Rover. In the quarter ending July 31, 2020, revenues increased by 8.24 percent, and in the quarter ending April 30, 2020, revenues increased by 11.54 percent.


Kroger's stores have the potential to make a lot of money. On April 30, 2020, Kroger reported $4.245 billion in quarterly operating cash flow. However, on July 31, 2020, the quarterly operating cash flow was $1.116 billion, and on October 31, 2020, it was $492 million.


On April 30, 2020, Kroger reported a $2.726 billion quarterly ending cash flow. On July 31, 2020, the quarterly ending cash flow was $94 million, and on October 31, 2020, it was -$640 million.


Kroger's quarterly cash flow decreased as it invested in its operations and paid down debt. On October 31, 2020, Kroger reported a quarterly investment cash flow of -$700 million and a quarterly financing cash flow of -$422 million. Kroger's long-term debt decreased from $12.111 billion to $11.925 billion on October 31, 2020.


Kroger has $3.282 billion in cash and short-term investments as of October 31, 2020. On January 31, 2020, the figure was $1.578 billion.


Kroger's worth is increasing. On October 31, 2020, the firm reported total assets of $48.465 billion. On January 31, 2020, the total assets were $45.256 billion.


On March 1, 2021, Kroger shareholders will get an 18-cent quarterly dividend. On May 14, 2020, the quarterly dividend increased from 16 to 17. On February 5, 2020, Kroger announced a future annualized dividend of 72 cents and a forward dividend yield of 2.15 percent.


Kroger is a great Aldi substitute because it is expanding and embracing new technologies to become a big participant in the grocery-delivery industry. Kroger is also a Warren Buffett investment and a cheap dividend stock.


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Walmart (NYSE: WMT)

Walmart (WMT) is the world's biggest retailer, with over 11,500 locations in 26 countries operating under 55 brands.


Walmart is the biggest retailer in North America, with 4,748 Walmart shops and 599 Sam's Club locations. According to Stock Rover, Walmart is the top retailer in the United States by volume, with $288 billion in food sales in 2019.


Many see Walmart (WMT) as a bargain investment since Mr. Market paid $144.36 for its shares on February 5, 2021. Nonetheless, on October 31, 2020, Walmart announced quarterly sales of $134.708 billion, quarterly gross profit of $36.359 billion, and quarterly operating income of $5.778 billion.


Walmart is a rapidly expanding corporation. According to Stock Rover research data, Walmart had a sales growth rate of 5.25 percent in the quarter ending on October 31, 2020. Walmart's quarterly sales, however, decreased to $137.742 billion on October 31, 2020, from $137.742 billion the previous year.


Walmart can earn tremendous sums of money. On July 31, 2020, it recorded a quarterly operating cash flow of $11.939 billion. On October 31, 2020, the quarterly operating cash flow was $3.924 billion.


On April 30, 2020, Walmart's quarterly ending cash flow was $14.985 billion. On July 31, 2020, the quarterly ending cash flow was $1.969 billion, and on October 31, 2020, it was -$2.576 billion.


Walmart's final cash flow dropped, I believe, as a result of debt repayment. On July 31, 2020, Walmart recorded a negative quarterly financing cash flow of -$8.379 billion. On October 31, 2020, the negative quarterly financing cash flow was -$3.526 billion.


On October 31, 2020, Walmart's total long-term debt was $45.599 billion. Walmart's long-term debt declined to $48.021 billion in 2020, down from $48.021 billion on January 31, 2020.


Walmart has a lot of value since its total assets on October 31, 2020, were $250.863 billion. Walmart's total assets increased to $236.495 billion in 2020 from $236.495 billion on January 31, 2020.


Walmart can amass vast sums of money. On October 31, 2020, Walmart had $14.325 billion in cash and short-term investments. Walmart's cash and short-term investments increased to $9.465 billion in 2020, up from $9.465 billion on January 31, 2020.


Walmart is a good value investment for me since it has a low stock price and a lot of assets. Walmart is also a growth investment for me since its e-commerce revenues are soaring.


In the quarter’s end on October 31, 2020, Walmart's e-commerce revenues increased by 79 percent. According to Digital Commerce 360, Walmart is the third-largest online retailer in the United States.

CEO Doug McMillon believes that Walmart is using its resources by completing online purchases at 2,500 locations. According to a news release, Walmart is increasing its e-commerce capabilities by establishing pop-up "eCommerce Distribution Centers" (eDCs) at Regional Distribution Centers (RDCs).


The eDCs are filling an increasing amount of Walmart.com online orders. My internet purchases are now filled at Walmart in two to three business days.


Walmart's 7.5 percent investment in TikTok Global might be one of its most valuable assets. TikTok Global is an American firm that runs TikTok in North America, a popular Chinese video streaming app. According to CNBC, McMillon will join TikTok Global's board of directors.


According to Fashionweek, Walmart is live broadcasting commercials for popular goods on TikTok. TikTok has a user base of 100 million in the United States. On December 18, 2020, Walmart tried the first shoppable live video on TikTok.


Ten notable TikTok stars, including dancer Michael Le, participated in the "Holiday Shop-Along Spectacular." Lee's TikTok videos have 43 million followers, according to Walmart.


By establishing itself as the premier TikTok merchant and pioneering TikTok retail, Walmart may offer value. TikTok is one of the most popular and quickly growing social media platforms in the world.

As a result, Walmart is a rapidly expanding firm with a strong e-commerce presence and an engaging social media presence. Walmart is a great dividend stock as well.


On February 18, 2021, Walmart will pay a 54 percent quarterly dividend. On February 19, 2020, the dividend increased to 53 cents.


Because of its low shares and dividends, I believe Walmart to be a good value and income investment. Nonetheless, I believe Walmart has significant growth potential due to its TikTok and e-commerce operations.

Costco (NASDAQ: COST)

Costco (COST) is America's most popular discount retailer. Costco is well-known for its one-of-a-kind business concept.


Customers in the United States must pay a $60 or $120 yearly membership to shop at Costco. Costco memberships were held by around 105.5 million individuals globally in 2020, according to Statista projections, due to the brand's reputation for cheap costs and great quality. Costco's membership base increased from 98.5 million in 2019 to 105.5 million in 2020, demonstrating the company's excellent expansion.


Costco, like Aldi, has no-frills shops that provide high-quality food and other items at reasonable costs. Unlike Aldi, Costco's warehouses are massive; the average Costco warehouse is 144,500 square feet, the same size as a Manhattan square block.


Traditional advertising is not part of Costco's no-frills business approach. Costco does not purchase television or newspaper commercials; instead, it distributes adverts to its members. Costco consumers are known for their loyalty; therefore, the tactic works.


Costco's unique business model is profitable. On November 30, 2020, Costco announced quarterly sales of $43.208 billion, gross profit of $5.75 billion, and operating income of $1.43 billion. According to Stock Rover Research, Costco has a revenue growth rate of 16.65 percent in the quarter ending November 30, 2020.

 

Costco is a fantastic deal. On November 30, 2020, it had $14.423 billion in cash and short-term investments, with total assets of $60.317 billion. Costco's low debt is one of the reasons why investors admire it. On November 30, 2020, Costco reported $7.529 billion in long-term obligations.


Costco is especially popular among investors because of its high payouts. On February 4, 2021, Costco declared a 70-cent quarterly dividend. On February 6, 2020, the Costco quarterly dividend increased to 65 cents from 65 cents. Costco also has a generous bonus dividend policy.


On December 1, 2020, it issued a $10 bonus dividend. On February 5, 2021, according to Dividend.com, Costco issued a future annualized dividend of $2.80 and a dividend yield of 0.79 percent.


On February 5, 2021, I believe Mr. Market overcharged Costco by $355.17. Costco is great growth and income stock, in my opinion. Costco's financial metrics, on the other hand, do not support that share price.