Waitrose's outgoing boss Lord Price played down the threat of Amazon's entry in the UK, insisting it was strong enough to fend off competition and would continue to be “one of the few” retailers to increase profitability this year.
Price, who was made a peer last week ahead of his new role as trade minister at the Foreign Office next month, conceded that Waitrose had not been immune from the "ripple effect" that Aldi and Lidl’s competite pricing has had on the market.
"We have had two years of deflation, in food which is pretty unprecedented....And in a business where margins are so thin, battling against deflation of nearly three per cent year after year is incredibly difficult," he told reporters.
Still, he believes that Waitrose's growth in underlying profits last year showed that it was "well set up" to face challenges this year including new rivals like Amazon, which announced a tie-up with Morrisons last week.
"Who knows what they will do. But from a Waitrose perspective – [the company] is well set up. It has got capacity in its online chain, it is investing in technology and improving service and as a consequence it is set to compete," he said.
Although he admitted that the arrival of a deep-pocketed rival would be a challenge: "If Amazon have got $5bn to throw at food retail then there could be an effect on anybody in the market," he said
The upmarket supermarket chain reported a 3.9 per cent rise in adjusted annual operating profits to £233m, excluding property profits. However, on a statutory basis, profits fell by two per cent.
"Waitrose profit percentage was the second highest in the industry at 3.9 per cent. Last only Asda made more profit as percentage of sales. And a lot of our competitors made no profit at all," Price said.
The retailer said it enjoyed 220,000 more transactions on average each week last year, helping it to sustain a 5.5 per cent share of the grocery market last year.
Like its supermarket peers, Waitrose has been introducing more services and concessions into its stores to drive footfall. It now has 117 cafes, six wine bars, nine juice bars and three sushi concessions as well as dry cleaning services in around half of its branches.
Waitrose's new managing director Rob Collins said there will be no major change to the strategy under his leadership, with 12 new branches due to open this year.