The scheme that allows developing countries to pay less or no duties on their exports to the European Union is more critical to large retailers like Primark than trading relationships with the bloc’s member states, the firm’s finance boss John Bason told Drapers today.
“As virtually all our clothing is made outside the EU, it is more important that we maintain trading relationships between the UK and countries in Southeast Asia,” he said.
“It is not about the bilaterals between the EU and the UK; what is important is the UK transferring the current GSP [Generalised Scheme of Preferences] scheme to the UK, which should be relatively straightforward.”
Bason was feeling bullish about Primark’s growth, after confirming its UK like-for-like sales are expected to be up by 2% for the first half to 4 March and total sales are expected to be 11% ahead of last year at constant currency.
“We talked about like-for-like growth of 2% at 16 weeks and it is the same after 24 weeks, which means that good momentum continued,” he said.
“UK consumers have more disposable income than they did a year ago. More than 50% voted for Brexit, there have been no changes to taxation and they still have the same jobs so things are looking good
“Theresa May has been saying she will trigger Article 50 at the end of March. I can’t see that that alone will alter consumer confidence, although there may be some changes further down the line.”
Primark has increased its retail selling space by 0.8m sq ft since the financial year end and will have 329 stores trading from 13.1m sq ft as of 4 March.
Bason refused to be drawn on a mid-term store target but confirmed that plans to expand by a space by around 10% a year over the next couple of years is “very likely”.
“Some people are still surprised by the amount of new stores we are opening in the UK, which shows we still have room for growth,” he said.
The retailer will open some 1.3m sq ft of new space in the coming year in locations including Uxbridge in the UK; Charleroi in Belgium; Granada in Spain; Zwolle in the Netherlands and Staten Island in the US, as well as extending its Downtown Crossing store in Boston, US.
“Our topline growth is massively driven by new selling space but we also need to make sure that our underlying business is robust,” he said.
“Our like-for-like growth in the UK is extremely welcome given that like-for-like sales fell at the end of last year, which people said was due to our lack of ecommerce. Primark is a great growth story and our expansion further afield is not a matter of if but when. We’re overcoming the margin difficulties from the weak sterling and in good shape.”
Primark’s parent group Associated British Food (ABF) said earlier today it expects to generate all of its adjusted operating profit in the first half, due in part to the impact of the sterling weakness against the US dollar on Primark’s purchases.
The full effect of the weakness will result in a greater margin decline in the second half because the firm’s currency hedges were at more advantageous exchange rates in the first half, it said.