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Expansion boosts Primark revenues

Revenues at Primark are expected to be 4.2% ahead of last year for the 24 weeks to 29 February, driven by increased retail selling space – but it has warned of a potential impact from the coronavirus crisis on the supply of certain lines later this year. 

Operating profit for the 24-week period is expected to be marginally down on last year on a constant currency and lease-adjusted basis.

Across clothing, footwear and accessories, sales are expected to have increased by 3% against the same period the year before. This has been driven by a strong contribution from new selling space, which was partially offset by a 1.3% decline in like-for-like sales.

Retail selling space has increased by 0.2 million sq ft since the 2019 financial year end and, at 29 February, 375 stores will be trading from 15.8 million sq ft –compared with 5.1 million sq ft a year ago.

Three new stores were opened during the 24 weeks to 29 February: Seville Lagoh in Spain; Kiel in Germany; and Milan Fiordaliso in Italy.

In addition, Primark relocated to larger premises in the Norte shopping centre in Porto, Portugal and the Norwich store in the UK was extended. Meanwhile, selling space was reduced in two stores in Germany and a small store in Rathfarnham, Ireland was closed.

In its pre-close trading statement, Primark said sales had been “particularly good over November and December”, but weakened in January and February against very strong comparatives in the prior year.

Sales in the Eurozone are expected to be 5.3% ahead of last year at constant currency for the 24 weeks to 29 February, with “particularly strong” sales growth in France, Belgium and Italy. Like-for-like sales for the Eurozone were up 0.5%, driven by “excellent” like-for-like sales in France and Italy and a “notable” improvement in Germany. 

Primark said it delivered healthy like-for-like sales growth in the US, with particularly strong trading at its Brooklyn store. Together with the contribution from the planned store openings at American Dream, New Jersey and Sawgrass Mills, Florida, the retailer said it expects a “much-improved” operating result for the full year.

During this financial year, the company expects to open 0.9 million sq ft of new retail space. During the next quarter, new stores will open in: Trafford Centre, Manchester in the UK; American Dream in New Jersey, US; Lens, Strasbourg, Paris Plaisir and Paris Belle Epine in France; Maximo in Rome, Italy; Mons in Belgium; Barcelona Plaza de Cataluña in Spain; Gropius Passagen in Berlin, Germany; and Warsaw, Poland.

In Eastern Europe, following it’s proposed opening in Warsaw, Primark has signed leases for further openings in Poznan, Poland; Bratislava, Slovakia; and Prague and Brno, Czech Republic.

Looking ahead to the full year, Primark, which sources a broad assortment of its products from China, said the Coronavirus outbreak could have an impact on its performance. 

“We typically build inventories in advance of Chinese New Year and, as a consequence, are well stocked with cover for several months and do not expect any short-term impact,” it said. “We are working closely with our suppliers in China to assess the impact on their factories and supply chains and their ability to fulfil our current orders.”

However, it added: ”If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases. We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions.” 

The full results will be announced on 21 April.

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