PUBLISHED: 16 AUG 2014 05:33:50 | UPDATED: 16 AUG 2014 05:33:50

FINANCIAL REVIEW KAREN MALEY

Are investors underestimating the risk that German global supermarket chain Aldi will erode the profits of the country’s biggest retailers?

Stocks such as Woolworths and Wesfarmers (which owns Coles) have been mainstays of investors, who appreciate their ability to grow earnings regardless of the state of the economy. But a major study released by investment bank UBS this week highlights the success that the privately owned discount supermarket chain has enjoyed in penetrating the Australian market.

Aldi already generates turnover of more than $5 billion in its 340 or so local stores, and UBS expects that revenue will climb at a compound rate of 13 per cent to reach $9.3 billion over the next five years.