Primark enjoys record Christmas trading in Europe, UK “performed well” with increased market share
All good for Primark over the festive period, with record sales delivered in Europe in the week before Christmas, parent Associated British Foods (ABF) said in its trading update Thursday.
The value fashion retailer’s total sales rose 7% currency neutral in the 16 weeks to January 6, driven by increased selling space, with sales 9% ahead at actual exchange rates.
Overall, retail selling space has increased by 0.3m sq ft since the financial year end with 350 stores trading from 14.2m sq ft to January 6, it said. Also expect Primark to have opened 1.2m sq ft retail space in the current financial year.
And the wider performance? ABF said the UK continued to “perform well” with strong comp sales, “a consequent strong increase in share of the total market, and trading which reflected the breadth of our consumer offering”.
Although sales growth across Europe was “held back” by unseasonably warm weather in October, this was followed by “good trading” in the five weeks leading up to Christmas, and accelerating to those “record sales” in the final seven days.
Trading in the US, it said, “has continued to make progress”. Operating margins in H1 are now expected to be close to a year ago with better buying “virtually offsetting the adverse effect of the weaker sterling/US dollar exchange rate on purchases”. Stock was tightly managed again this period, it noted.
Kate Ormrod, lead retail analyst at GlobalData, said the latest Primark results “caps off an excellent 2017… and ensures it remains on course to overtake Next as the UK’s second largest clothing retailer in 2018.”
Ormrod added: “Unlike many retailers on the high street, Primark has shown it does not need the online channel to prop up its performance, and as bricks & mortar retailing remains its sole channel it continues to seek out UK expansion opportunities.
“However, Primark needs to be mindful of stores becoming a burden in the long run if it ever decides to venture online.
Despite improved trend incorporation, Primark needs to up its game in home, as it still lags behind rival H&M which has a more premium design aesthetic, and is set to open standalone home stores this year. Investment in quality and design is a must, and while it can counteract this by extending its pricing architecture, it must undercut H&M in order to gain share.”
ABF also said it is standing by its outlook for the wider group, with progress expected in adjusted operating profit and adjusted earnings for the full year.