The chief executive of Drapers’ Large Multiple of the Year Primark says there’ll be no let-up in the pace of its store opening strategy.
Primark’s financial year-end results have been out for less than a week when Drapers catches up with chief executive Paul Marchant, who was unaware at the time that the value giant would take home the Large Multiple Retailer of the Year gong at the Drapers Fashion Awards. Speaking from his New York hotel room while on an inspiration and fact-finding mission to the US, he complains that despite being on the 12th floor it’s still “the noisiest room I’ve ever stayed in”, before joking that if we hear sirens then nothing untoward is going on.
It’s hardly surprising that he’s upbeat. The latest set of results show the Primark machine is continuing to steam ahead, at a time when other retailers are faltering and some grinding to a stuttering halt. Revenues rose 15% to £3.5bn in the year to September 15, while like-for-like sales rose 3%. And current trading has been “good”, says Marchant. “We’ve been pleased with the reaction to our autumn 12 ranges and that’s across all product categories and markets. We’ve benefited from the good weather, which has been cold, in contrast to the start of last autumn. Our range is looking strong, our stores look good and two months in we’re happy.”
The fast-fashion giant’s growth has been propelled by an aggressive store opening programme both here in the UK and in the eight markets in which it operates in Europe, including Belgium, Germany, the Netherlands, Portugal, Spain and most recently Austria, where Marchant says the consumer reaction has been “overwhelming”. In the past financial year alone the retailer opened 20 stores, including the relocation of its Metrocentre store in Gateshead, adding 900,000 sq ft of selling space, creating more than 10,000 new jobs and taking its entire workforce to 43,000 by the end of the period. Such was the flurry of excitement when Primark arrived in Berlin in July that the cash register didn’t stop ringing, resulting in the company’s highest ever first-day sales.
The momentum has continued into this financial year. In September, Primark opened its second store on Oxford Street, with an 82,000 sq ft four-floor space on the east end of the shopping mecca, as well as its first store in Austria. With a hint of pride, Marchant tells Drapers that Primark will open its 250th store, in Santiago de Compostela in Spain, in the days that follow this interview, and that between now and Christmas there will be a further 15 stores opening across the UK and Europe, including its first womenswear concession in Selfridges, at the luxury department store’s Trafford Centre branch (two menswear concessions opened at Selfridges’ Trafford Centre and Birmingham stores in November last year).
While there are no firm plans in place to enter further European markets, Marchant says “watch this space”, indicating that expansion could be on the horizon. Venturing beyond the confines of Europe, however, is some way off. “There is so much scope for us to expand in Europe before we need to consider moving [further afield]. However, the brand has a huge potential to travel. So could I see the brand operating beyond Europe one day? Absolutely.”
The store opening programme will continue at pace, with each store modelled on Primark’s new store concept. Gone are the basic interiors of the past. Beginning with Westfield Stratford, known internally as its ‘store of the future’, and culminating, says Marchant, in its eastern Oxford Street store, the retailer has devised a more inspiring shopping environment, with Oxford Street featuring more exciting displays and in-store technology such as video screens. “[It’s] been a real focus of mine in my four years at the business to ensure that as well as offering great product and amazing prices, we sell our merchandise in a retail environment that is exciting and desirable.”
Primark’s relentless focus on store openings and lack of an online store makes it unique on a high street where many retailers are trimming down their store portfolios in favour of a greater online presence. There are still no plans to launch online. “Clearly having a business model that is based on low average selling price and relatively tight margins makes the financial dynamics of trading online a challenge,” says Marchant.
“We have a customer who enjoys the store experience and our recent trading statement has shown that. We don’t believe that not having an online business is in any way hindering our progress. So at this stage there are no plans for Primark to trade online.”
But Primark’s super-low prices don’t just affect the business’s digital strategy. Despite its strong year-end results, the period wasn’t without its challenges. High cotton prices put a squeeze on margins as Primark chose to absorb the costs rather than pass them on to the consumer – operating margin was flat at 10.2%, in line with last year when the retailer also had to absorb these costs. Price sets Primark apart on the high street, but is there a point when prices will have to go up? “Can I sit here today and put my hand on my heart and say ‘no, selling prices will never go up’? Of course I can’t say that,” says Marchant. “But what we are absolutely obsessed with is making sure the competitive advantage between ourselves and everybody else is retained.”
Marchant knows what he is talking about.
A veteran of fashion retail, his parents were retailers and he started his career straight out of school. His CV is a veritable roll call of who’s who on the high street, from Debenhams to Topman, River Island and New Look, before joining Primark in 2009. “When the opportunity came to take over the reins from Arthur Ryan at Primark and move to Dublin it was a very easy decision to make. I genuinely feel very honoured to have been given the opportunity.”
He talks fondly of Primark founder Ryan, himself an industry stalwart and winner of this year’s Drapers Lifetime Achievement Award, and someone Marchant says has been a huge support. Ryan says that despite “still being very much part of the business”, he leaves Marchant to run the business with the board.
Marchant says: “He is inspiring, he’s very single-minded, he’s obsessed about doing the right thing for the business, and the principles he founded [Primark] on of offering great product at great prices is still very much the principle we adopt today. He is genuinely a great friend and I don’t say that lightly, we enjoy each other’s company and we share very similar views on retail. We’re totally aligned on the principles that make Primark the special business it is. And he’s a great chairman, and we enjoy having his input in the business today.”
Certainly Ryan’s retail pedigree is hard to dispute. But there’s one thing Drapers is dying to know. Are the rumours true, does he really wear slippers behind his desk?Chuckling, Marchant says: “I wouldn’t believe all the anecdotes you read.”