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Primark profits rise despite like-for-like sales drop

Primark has announced an 8% increase in sales year on year and a 6% jump in adjusted operating profit to £341m, as a result of increased retail selling space.

However, like-for-like sales for the group declined 1.5% for the 24 weeks to 3 March, due to “unseasonably warm weather in October”.

Operating margin in the first half was 9.8%, down from 10% in the same period last year. The retailer said better buying “virtually offset” the adverse effect of the US dollar exchange rate on purchases. It added that stock was “tightly managed” and markdowns were in line with last year.

In the UK like-for-like sales increased by 3%, and overall sales were up by 8%, mainly driven by increased selling space and the breadth of consumer offering.

The company opened seven new stores in the period across Europe, and made three relocations in the UK.

John Bason, finance chief at Primark owner Associated British Foods, told Drapers: “As a high street retailer, we’ve been increasing footfall in an environment where we’re seeing an [increasing] number of casualties. Our [UK] like-for-like sales growth has been driven by an increase in footfall. Although the UK consumer has seen some squeeze in their incomes, people will buy if you have a differentiated offer.”

Bason said there are plans to expand Primark’s digital offering, citing an 8% average increase in website visits and more than 11 million social media followers.

“It is an important part in the relationship between Primark and its customers. It is something we’re constantly developing, whether it is through social media platforms or what people expect from the website.

Bason maintained that there are no immediate plans for digital expansion through click-and-collect, although it remains “something to look at”.

The company opened seven new stores in the period across Europe, and made three relocations in the UK.

Primark plans to open a store in Sawgrass Mills in Florida in late 2019, which will ”provide the opportunity to trade in another type of retail environment, in both mall format and geographic location, to our existing stores”.

Bason said Primark has been striving to adjust its customer offering to each local market accordingly, adding that the retailer’s sales in the US have risen by 20% half-year on half-year during the period.

“We recognise the US is a massive, wealthy market but my goodness, it’s a different market to Europe. The US itself has many different markets within it. We have always said we would have a discipline to trial a number of different locations and see what the experiences are in each of them,” he said.

“The US retail space is undergoing a lot of change. We know US consumers like our offering and the prices. What we have to work out is the right size of stores. There is a lot of retail available in the US – the [thinking is,] let’s get the right sort of operating model for our stores and fine-tune it, before rolling out.”

 

 

 

 

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