Aldi has vowed to cut prices if necessary to take on Tesco’s new discount chain, Jack’s, after achieving more than £10bn in annual sales in the UK and Ireland for the first time.

Profits at the UK and Irish arm of the German chain jumped by almost 30% to £265m in 2017 as sales rose by 16.4% to £10.2bn, driven by the opening of 70 more stores. Aldi said it had drawn in more than one million new customers, helping to increase sales at established stores alongside the new openings.

The chain, which overtook the Co-op last year to become Britain’s fifth biggest supermarket, has more than 775 stores in the UK and Ireland, pushing its share of the grocery market to 7.6%.

Aldi confirmed on Monday that it planned to open 130 stores in the UK over the next two years, creating 5,000 jobs and taking it closer to its target of 1,000 stores by 2022.

Aldi now expects to beat its 2022 target and said it wanted at least 1,200 stores by 2025, despite being likely to slow its pace of opening to about 50 stores a year from 70 this year. “We are powering up where others pare back,” Giles Hurley, the chief executive of Aldi UK and Ireland, said.

Tesco, Sainsbury’s, Asda and Morrisons have all been forced to cut prices and improve their cheapest own-label ranges in response to the rise in popularity of Aldi and rival Lidl, while Tesco recently opened its own discount chain, Jack’s.

Hurley said the company was “checking [Jack’s] offer carefully” and was determined to maintain its position as the UK’s cheapest grocer, citing trade journal the Grocer’s analysis, which put it at 22% cheaper than the “big four” supermarkets.

“We will respond as required to maintain price leadership. It’s not just about price it’s about quality of our offering,” he said. “Aldi has carefully honed our business model. It has taken 25 years to perfect it … I am very strongly of the belief that it will be a real struggle for any more complex supermarket to successfully imitate our model let alone replicate it.”

Aldi said its best-performing products included items from its Specially Selected premium range – which generates annual sales of more than £1bn – while fruit and veg, fresh meat and fish, its mother and baby range and beers, wines and spirits also did well.

The company’s online sales rose by 70% in 2017 as it added spirits such as its Oliver Cromwell gin to the range. Hurley said there were no immediate plans to add groceries to the homewares, alcohol and clothing available online.

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The company spends more than £100m a week with British suppliers, which provide 100% of its fresh meat, eggs, milk, butter, mushrooms and potatoes, and is actively looking to source more products from the UK.

Hurley said that, as Brexit approaches, the firm was talking to its suppliers about the possibility of stockpiling some goods but he said it would be difficult for food producers and retailers, who sell large volumes of products that mostly have a short shelf life, to do so. “What border controls actually look like [after Brexit] is going to be critical in determining how we run the supply chain,” he said.