Primark back on track in UK, US store count to grow but Germany has issues
Primark’s owner Associated British Foods (ABF) reported its full-year results on Tuesday and they showed that the fashion retail chain’s sales, margin and profits “increased significantly as more normal customer behaviour resumed after the pandemic”.
Overall, ABF group revenue increased 22% to £17 billion and adjusted operating profit rose 42% to £1.435 billion.
Meanwhile, Primark’s total adjusted sales rose 43% to £7.7 billion. And the full-year adjusted operating profit margin improved to 9.8% from 7.4% as it saw a significant increase in customer footfall and sales densities. Adjusted operating profit at the chain was £756 million, up 136%.
New stores are driving much of the growth and full year like-for-like sales for Primark were 10% lower than pre-Covid levels three years ago but 1% ahead of last year.
It all points to an increasing normalisation of shopping behaviour, and the company said UK like-for-like sales and market share are now broadly in line with pre-Covid levels. Trading in the UK was strong and improved as the year progressed with total adjusted sales up 48%. Like-for-like sales rose 13% for the last quarter.
Total sales in the Republic of Ireland were 48% of the previous year and in continental Europe, they were 42% ahead with like-for-like sales up 5%. But the company continued to face challenges in France, the Iberian market and Germany. However, its decision to expand in Italy was justified as it got an enthusiastic customer reaction to its for new stores.
Overall European consumer confidence was generally weaker and market data for some countries indicates that the total apparel market was still well below pre-Covid levels during the year. And in Germany, it’s mulling “the repositioning of Primark to increase sales densities and make the business sustainably profitable”. The German business includes some very big stores, but sales densities have been declining in recent years and haven't recovered post-pandemic. It's now looking at its locations there on a store by store basis.
All this comes as the chain is continuing to build digital capability, with a new UK website, and a click & collect trial launching in 25 UK stores. It expects “to make significant progress in Primark's digital development with the launch of our new enhanced website in all our markets”.
And having rebuilt the new store pipeline during the last financial year, it should open a net 1 million sq ft of retail selling space this next financial year.
That will include a lot of new US space. Its US business performed strongly with total sales 11% ahead of the prior year. Its new stores all performed well and like-for-like sales were 3% up on pre-Covid levels. “We look forward to nearly doubling the retail selling space in this important growth market in the coming year,” it said.
ABF said Primark’s trade was affected by the exceptionally hot summer, but with colder weather it has seen many markets improve.
During the year, its stores in retail parks continued to perform strongly and it saw more customers returning to major high streets. Sales densities in its stores in destination cities were “much improved with the return of commuter traffic and the growth of tourism into the summer season”.
Throughout the year, nightwear and loungewear sold well as customers bought core essentials. This trend has continued into AW22.
There has been “particularly strong demand” for novelty prints and cosy textures including fluffy pyjamas and thermals, with both velvet plush leggings and the 'Snuddie', which has built on the strong sales of last year, being "standout best-sellers”.
Demand has also been strong for exclusive collaborations. The fourth collection from its partnership with “Kem Cetinay has had broad appeal across European markets and is very strong in the UK, reflecting a return to a smart casual menswear look”.
In the UK and Ireland the latest kids' collection from Stacey Solomon has started well too.
Its collaboration with Greggs also “created real excitement around the Primark brand this year and we are launching a third range of clothing and gifting to coincide with the Christmas season”.
In its important Iberian market it has seen very strong customer demand for its first collaboration with Spanish model and actress Paula Echevarria.
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