For the 24 weeks to March 2, 2019, Primark, part of the diversified group Associated British Foods, reported 4.4 percent rise in sales, ahead of last year, which the company said was driven by increased retail selling space partially offset by a 1.5 percent decline in like-for-like sales. With a much higher margin, Primark added that profit was 25 percent ahead of last year. The company further said that early customer reaction to the new spring/summer range has been encouraging.
The UK continued to perform well with sales 2.3 percent ahead of last year and like-for-like sales growth of 0.6 percent. The effect of low footfall in November, Primark said in a statement, was offset by good trading in all other months of the first half, with strong growth in the last two weeks of the period compared to a spell of very cold weather last year. Sales in the Eurozone were 5.3 percent ahead of last year at constant currency but like-for-like sales fell by 3.2 percent driven by the decline in the German market and also footfall in November across all markets. Strong sales growth was however seen in Spain, France, Italy and Belgium.
Primark sales suffer in Germany
In Germany, the company has strengthened the management team to address the trading which continues to be difficult and preparations are underway to reduce selling space at a small number of German stores in order to optimise their cost base. The company added that its business in the US continued to perform strongly, driven by excellent trading at its recently opened Brooklyn store combined with like-for-like sales growth. This, coupled with the benefit to store profitability arising from the reduction in selling space at Freehold and Danbury last year, resulted in a much-reduced US operating loss.
Operating margin in the first half was 11.7 percent, ahead of the same period last year when margin was 9.8 percent. The company said that foreign exchange contracts are in place for all of the remaining purchases for the year and the strengthening of the US dollar reflected in those contracts will result in a lower operating margin in the second half. For the full year, expectation of operating profit is unchanged, with margin a little ahead of last year.
Primark expands retail presence
Retail selling space increased by 0.3 million sq. ft. since the financial year end and, at March 2, 2019, the company operated 364 stores. Four new stores were opened in the period at Seville and Almeria in Spain, Toulouse in France and a city centre store in Berlin, Germany. In the UK, the company relocated to larger premises in Harrow and the Merry Hill and Peckham stores were extended.
The company expects to add 950,000 sq. ft. of new selling space in this financial year, comprising stores in new locations and additional space from relocations. In the third quarter, a net 0.4 million sq. ft. of additional selling space is planned with six stores opening over six days. Primark has already opened new stores in Brussels in Belgium, Bordeaux in France, Wuppertal in Germany, Hastings, Bluewater, Milton Keynes and Belfast in the UK and relocated to new premises in Birmingham High Street which, at 160,000 sq. ft., became its largest store.
For the remainder of the year, new stores are planned for Utrecht in the Netherlands, Bonn in Germany and its first store in Slovenia, in Ljubljana. The company’s store in Oviedo, Spain has been closed, a store in the King of Prussia mall in Pennsylvania has been downsized, and the company is working to reduce selling space at a small number of German stores. Ljubljana will be its first store in central Europe and it has now signed leases for first stores in Poland and the Czech Republic.
Photo credit: FashionUnited