Aldi, with domestic operations based in Batavia, Illinois, said Thursday it will increase its U.S. property holdings through a combination of new openings and store conversions pegged for completion by the end of 2028. As part of those plans, Aldi also announced it had completed its acquisition of Southeastern Grocers and its Winn-Dixie and Harveys Supermarket chains, moves it said “will drive significant growth in the Southeast region over the next few years” through conversions of those stores.

Aldi unveiled its plans the same day the largest U.S. supermarket chain, Cincinnati-based Kroger, told investors that court hearings on the Federal Trade Commission’s attempt to block its $25.4 billion purchase of Albertsons Cos. won’t start until this summer. Kroger and Albertsons, based in Boise, Idaho, have argued that their merger is crucial for them to successfully compete with the aggressive competition facing the grocery industry.

That U.S. retail sector has seen upheaval for more than a decade or so, with consolidation and significant disruption for chains such as Kroger. New international discounters, not only Aldi but fellow German low-cost grocer Lidl, have been at the top of the list of retailers debuting stores. E-commerce giant Amazon is offering groceries online and in its own brick-and-mortar locations, including its Whole Foods Market chain that it bought in 2017 for $13.7 billion.

Discount giants Walmart as well as Target recently said they are opening hundreds of new stores, and they are expanding their food-and-grocery sections. And warehouse clubs like Costco, BJ’s Wholesale Club and Sam’s Club — a brand that plans over 30 new stores — are increasingly formidable competitors for grocery market share, particularly at a time when shoppers have become more cost conscious because of inflation raising the cost of food and other items.

Aldi’s plans will make competition even tougher, “throwing down the gauntlet to traditional grocery players,” Neil Saunders, managing director of GlobalData, said in a note to clients.

“In our view, it is a major challenge to the market, which could cause significant disruption and pain for other retailers,” he said.

The planned investment by Aldi’s of more than $9 billion over the next five years on its national expansion will build on its presence in the Northeast and Midwest, adding nearly 330 stores across both regions by the end of 2028. Aldi will also expand its footprint in the West by adding more stores in Southern California and Phoenix, as well as entering markets like Las Vegas.

In the Southeast, the acquisition of Southeastern Grocers and its Winn-Dixie and Harveys chains support Aldi expansion in a key region, the company said. Aldi said it was buying Jacksonville, Florida-based Southeastern Grocers last summer.

In addition to organic growth through new store openings, many Winn-Dixie and Harveys markets will change over to the Aldi format, according to the company.

“Of the 400 acquired Winn-Dixie and Harveys Supermarket stores, a significant number will convert to the Aldi format over the next several years,” an Aldi spokeswoman said in an email to CoStar News. “These stores are included in the 800 stores that Aldi will add nationwide by the end of 2028.”

Starting mid-summer, Aldi said it will begin a phased approach to the store-conversion process. It expects that roughly 50 stores will begin that process during the last half of this year, with the majority of these stores reopening in 2025.

“As announced last August, Aldi intends for a meaningful amount of Winn-Dixie and Harveys Supermarkets to continue to operate under their current banners,” Aldi said. “Both Aldi and Southeastern Grocers are committed to a seamless transition and continuing to deliver excellent value and customer service to their shoppers.”

JLL released a grocery report in February that discussed the sector and Aldi’s “aggressive” expansion.

“Aldi further solidified its position as one of the fastest-growing grocers, leading new store openings once again,” JLL said. “Last April, Aldi announced plans to open 120 new stores in 2023, which would bring its store count to 2,400 stores nationwide by the end of 2023. Out of the 120 planned new stores, Aldi opened 109 locations, totaling nearly 2.5 million square feet of new space — a 32.3% increase from 2022.”

Aldi “has several weapons in its armory that other grocers need to be cautious of,” according to Saunders.

“First, it is a price leader with extremely competitive prices,” he said. “Second, it has a relatively simple offer with limited SKUs [stock keeping units], which improves efficiency and protects margins as well as allowing consumers to easily find value and limit their spend. Third, as a global group it has enormous buying power that belies its relatively small market share in the U.S.”

He added that “on top of this, Aldi has worked hard to create a compelling shopping experience at its U.S. stores and, despite its low prices, often has more modern and better-looking shops than some of the older, shabbier outlets at traditional grocers like Kroger.”

Kroger didn’t immediately respond to an email from CoStar News seeking a comment on Saunders’ remarks.

On Thursday’s fourth-quarter earnings call, Kroger CEO Rodney McMullen provided an update on the company’s pending acquisition of Albertsons. Last month, the FTC filed a lawsuit — and several state attorneys general joined in — to stop the merger on antitrust grounds.

“While we were disappointed about the FTC’s recent attempt to challenge our merger, we were not surprised given the current political environment,” McMullen said. “We are committed to defending the merger in litigation because we believe it is the best outcome for American families. We cannot close the merger while these action[s] are pending. Hearing dates have not been set yet, but we expect these to proceed in mid- to late summer.”

Kroger officials said they plan to complete 30 major store projects this year, including adding new stores, relocations and expansions.

In the fourth quarter, Kroger’s sales rose about 6%, to $37 billion.

“While Kroger’s operating profit and net income numbers were both elevated and strong during the final quarter, the sales line is looking a lot shabbier,” Saunders said.

He added that “total growth of 6.4% looks robust, but it is flattered by the addition of $2.7 billion from an extra week of trade [in the quarter]. When this is removed, total sales declined by 1.3%. Some of this is down to the fluctuation of gas prices, but, excluding fuel, sales were still down by 0.5%. More worryingly, for the first time this fiscal year, comparable sales excluding fuel have slipped into negative territory, declining by 0.8%.”