Primark has reported a 7% increase in sales in the 24 weeks to 3 March to £3.48bn but like-for-likes took a knock and were down by 1.5% due to unfavourable weather.
The 1.5% drop in like for like sales was attributed to an unseasonably warm October and the freezing conditions in March, which negatively affected shopper activity. However the business pointed out that like-for-likes sales for the 15 weeks to 24 February 2018 delivered growth of 1% and record sales were achieved in the week before Christmas.
Primark performed very well in the UK with sales 8% ahead of last year and a strong increase in the brand’s share of the total clothing market. This, it said, was driven by a 3% growth in like-for-like sales, an increase in selling space and the breadth of its consumer offering.
Sales in Continental Europe were 6% ahead of last year, mainly driven by increased retail selling space, and partially offset by like-for-like decline in northern Europe. The US business, which is concentrated in the North East of the country “made progress”, and Primark said it expected to reach an agreement soon to open a store in Sawgrass Mills, 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”.
Underlying operating profit was up 4% at £341m in the period and operating margin was 9.8%, compared to 10% in the same period last year. The business said better buying virtually offset the adverse effect of the US dollar exchange rate on purchases and tight stock control meant mark-downs were in line with those of last year. The business said it expected an acceleration in profit in the second half.
During the period total retail selling space increased by 0.4m sq ft with 352 stores trading from 14.3m sq ft compared to 13.1m sq ft a year ago. During the period seven new stores were opened in Bielefeld, Münster and a second store in Stuttgart in Germany, Charlton and Staines in the UK, Loulé in the Algarve, Portugal and Le Havre in France.
There were also three relocations in the UK: a return to the redeveloped Westgate shopping centre in Oxford and a move to larger stores in Rotherham and Grimsby. Since the period end Primark has returned to larger premises in Kingston Upon Thames and its new store at Westfield White City is also set to open in the second half.
Senior market analyst at www.cityindex.co.uk Fiona Cincotta said that while profits had come in a “tad below guidance”, these were a “solid” set of numbers.
“The 1.5% fall in like-for-like sales at Primark isn’t very far below company guidance for a 1.0% drop. Crucially, management is still confident that margins will improve in the second half. Primark hasn’t been immune to the freezing late-winter conditions that hurt other retailers, but the damage was mostly confined to Northern Europe. The UK business performed commendably under the circumstances, helping Primark grab even more market share at home,” she said.
“There’s plenty of room left for growth. Compared to other fast fashion retailers, such as Zara, Primark has a relatively small international footprint – and a cheaper offering to boot,” Cincotta added.