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Primark will hold prices despite margin pressure

Primark’s retail prices will remain steady despite warnings that its margins will take a hit next year, John Bason, chief financial officer at the retailer’s owner, Associated British Foods, has told Drapers. 

“As we look forward and there is this uncertainty about the exchange rate and market decline, there will be no change in our pricing,” he said. “It’s uncertain for us, but unchanging for our customer.” 

The value retailer had a 4% increase in sales year on year for the 52 weeks to 14 September, following the addition of 950,000 sq ft of retail space to its portfolio in the period. However, as like-for-like sales dropped by 2%, Primark warned that future margins are set to take a hit.

“Margin is going to be a bit difficult as we go into next year, particularly as a result of the drop in value of sterling in August,” Bason told Drapers following the pre-close update. “However, reduced material prices will allow for some mitigation. We’ll work very closely with our suppliers, who are often in sourcing countries that have a currency pick up, such as Turkey and China.” 

Bason was positive about Primark’s performance in a “soft market”, and compared to the rest of the fashion retail industry. 

“In the UK you’re not looking at many people who are talking about sales growth of 3%. The market has been quite soft since spring so, believe it or not, we’re very pleased and the -1% [dip in like-for-like UK sales] is an outperformance of where the market is overall.”

During the period Primark completed 15 new store openings in the UK and mainland Europe. 

Read more: World’s biggest Primark store opens in Birmingham

Eurozone sales were up 5%, driven by Spain, France Italy and Belgium. 

An additional one million sq ft of additional selling space is planned to open in the coming financial year including new stores in Paris, Calais, Milan, Barcelona and Rotterdam. Primark’s first Polish store will open in Warsaw in 2020. 

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