Dive Brief:

• Lidl's new U.S. stores are quite different than its European counterparts, analysts from Bernstein wrote in a July 7 briefing note, according to Food Navigator.
• The analysis notes U.S. stores are larger (20,000 square feet versus 10,000 square feet), carry more products (4,000 SKUs versus 1,500), place more of an emphasis on organic and locally sourced products, and are in bigger traffic locations with higher-end fittings and furnishings. Analysts wrote with the better quality of the products and locations, plus with more selection available, at first glance the Lidl stores look unsustainable from a profitability standpoint.
• On pricing, analysts found Lidl was about 13% cheaper than Wal-Mart on private label products — which make up about 90% of the store's merchandise. In Europe, Lidl's private label products are assigned "brands," while in the U.S., private label products are labeled with more of a functional description of what's in the package. "All the changes to the US model point towards higher costs and a step away from the hard discount model as we know it in Europe," analysts wrote, according to Food Navigator.

Dive Insight:

With more than 10,000 stores in 27 countries, German hard discounter Lidl has a formula for success. And that formula, company executives have said, is built on two things: Its ability to deliver quality merchandise at low prices and the way it adapts to consumers and their desires in each country where it does business. 

“We’re agile as a retailer,” Lidl US CEO Brendan Proctor said at an event in May. “We’re able to adapt and learn from the markets we’ve gone into. … Personally, I believe one of our strengths is adapting to the customer’s needs and what the customer wants, and greatly curating the range around that.”

In more than 40 years, Lidl has only pulled out of one market: Norway in 2008. Otherwise, it's grown, expanded and learned about the worldwide consumers it serves.

The U.S. Lidl stores have been markedly different than their European counterparts from the very beginning. Their design, with a curved roof and plentiful natural light, meet American shoppers' expectations of a supermarket. The layout is different too — much like the planned remodels of the U.S. version of another European discount store: Aldi. 

With just a handful of stores open in the U.S. so far, it's too early to tell how shoppers are responding to Lidl and whether their American model will prove sustainable from a profit standpoint. A company spokesperson told Food Navigator that the retailer is pleased with how "customers have taken to our stores."

It is easy to see that the discounter's plans to quickly spread throughout the Eastern United States are continuing. This summer, Lidl plans to open 20 stores in the U.S. — with four more opening this week — with a total of 100 stores in the next year.

Other analysts are more bullish on Lidl's prospects in the U.S. Kantar Research expects the discounter to have $700 million in sales at the end of next year. They expect that to expand to 630 stores and $8.8 billion in sales by 2023.