Primark sales jump on sales and store growth
Value clothing retailer Primark saw sales jump in the first ten months of the year thanks to the expansion of its store portfolio both home and abroad and strong trading in the run-up to Easter.
In the 40 weeks to 24 June sales were up 13% at constant currency, driven by a 13% increase in retail selling space and growth in like-for-like sales. At actual exchange rates sales continued to benefit from sterling weakness and climbed 21% year-to-date.
Sales growth in the last 16 weeks was 15% at constant currency and 21% at actual exchange rates.
Primark said third-quarter trading was particularly strong in the lead up to Easter, benefiting from strong comparisons with results last year that were affected by poor weather and an earlier Easter holiday.
The clothing retailer performed particularly well in the UK where year-to-date sales were up 9% on last year and it continued to increase its share of the total clothing market.
First-half operating profit margin of 10% declined from 11.7% in the comparable period last year, reflecting the strength of the US dollar on input costs.
"In our interim results we explained that the full effect of sterling weakness against the US dollar would have a greater impact on margin in the second half because currency hedges maturing in that period would be at less advantageous rates," Primark explained. "However, with the benefit of improved input margin mitigation and lower markdowns, we now expect the full year margin and the rate of decline to be in line with the first half."
During the third quarter, ten new stores opened in the UK, Spain, Belgium, the Netherlands, Italy and the US. Early trading from these stores, Primark says, particularly those in Florence and the US, has been good. The retailer expects to add an additional four stores in the UK and a fourth store in Italy by the end of the financial year.
Charlotte Pearce, Retail Analyst at GlobalData, notes: "Though retailers such as New Look and Matalan are forecast to lose share of the clothing market in 2017, Primark's market share is set to increase by 0.2 ppts to 6.6%, retaining its position as number three in the clothing market.
"Primark must ensure it does not lose appeal among shoppers as its own ranges can be skewed heavily towards the tween market and it could easily widen its appeal. Further investment in trend-led items both in homewares and its clothing ranges will be key to maintaining Primark's performance."