Primark still on a high despite summer slowdown
today Nov 7, 2018
One of Britain's most closely watched retailers – Primark – saw its owner Associated British Foods releasing its full-year results on Tuesday and it seems that the year ended September 15 was yet another good one for the value fashion and homewares chain.
Not that it was one of complete progress. Sales at Primark may have been £7.477 billion, which was 6% ahead of last year at actual exchange rates and 5.2% ahead at constant currency. But this was driven by increased selling space and it was offset by a 2.1% decline in like-for-like sales.
However, its operating profit margin increased to 11.3% from 10.4% and adjusted operating profit was 13% ahead at constant currency at £543 million.
UK, EUROPE, US
Primark performed “particularly well” in the UK with sales 5.3% ahead, like-for-like sales up 1.2% and its share of the total clothing market “increased significantly” in a market which declined year-on-year.
But it wasn’t immune to the summer slowdown. Like-for-like growth had been “strong in the first half of the year and was marginally down in the second half in a much weaker market.”
However, it said sell-through of the summer range was strong so markdowns were lower than expected and early trading of its AW18 range “has been encouraging.”
Meanwhile, sales in the eurozone were 4.7% ahead of last year at constant currency as it saw sales growth in Spain, Portugal and Germany with particular strength in France, Belgium and Italy. Adjusting for cannibalisation from new store openings, it estimates that the like-for-like decline was 3.6%.
This was caused by unseasonable weather during three distinct periods this year, especially in northern Europe, and by soft trading in a weak German market.
But the company said that it’s “very pleased” with its US performance in the second half of this year. Its ninth store, which opened in Brooklyn in July, “has been trading very strongly” and its existing stores delivered like-for-like growth in the second half, including those stores with reduced selling space, at Freehold and Danbury, the space reduction boosting store profitability.
It has signed agreements for two further stores. American Dream, New Jersey is planned to open in 2019 and Sawgrass Mills, Florida in 2020. And it’s working on adding further stores in the medium term in the eastern region of the US.
Looking ahead to next year, forward exchange contracts have been secured against all merchandise in the first half, and the weaker US dollar exchange rate for these contracts will deliver a higher H1 margin year-on-year. But assuming that purchases for the spring/summer range are secured at current exchange rates it expects a lower H2 margin.
In the next financial year, it’s planning to add over 1 million sq ft of net additional selling space. Germany, France, Spain and the UK will see the most space added and overall, it will add a net 15 new stores. Its first store in Slovenia will open in 2019 in Ljubljana, taking Primark to its 12th country. It’s also planning to enter a number of other markets in central and eastern Europe over the coming years, and has signed the lease for its first store in Warsaw.
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