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Published
Jan 16, 2020
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Primark upbeat on UK, Europe and US strength as new stores drive growth

Published
Jan 16, 2020

Primark is one of the Britain’s (and the world’s) most successful fashion retailers so it’s always interesting to see how it has fared in one of the toughest periods for retail in recent history. 


Primark had a fairly strong Q1 - Photo, Sandra Halliday



And its parent company’s trading update on Thursday, which covered the 16 weeks to January 4, had good news. Associated British Foods said trading at the chain “has been good in this first quarter” of the financial year. Sales were up 4.5% year-on-year at constant currency and 3% up at actual exchange rates, which might not be spectacular, but those are the kind of figures many of its fashion retail peers would envy at present. 

However, the firm added that the sales growth was due almost entirely to the increase in selling space. It’s only managing to drive its sales higher at present by adding new stores, which means its like-for-like performance is less buoyant. That’s perhaps unsurprising in a fashion market that’s under heavy pressure and facing the kind of change it’s never had to deal with before. 

It didn’t give a specific number for its like-for-like sales but said its performance on this measure “improved, driven by a marked upturn in the eurozone”.

And its core UK market? The UK “continued to perform well”. Sales were 4% ahead of last year, “driven by a strong contribution from new selling space,” but there was a “marginal decline” in like-for-like sales for the period. Yet this doesn’t appear to be too worrying in a very weak market and the company managed to carve out a further increase in share of the total clothing, footwear and accessories market. It also said “trading was particularly good over November and December,” which is impressive given that while many of its peers have talked about a healthy November on the back of Black Friday, they largely saw a weak December.

As mentioned, sales in the eurozone were on an upward trajectory with a 5.1% rise at constant currency “as a result of the increase in selling space and like-for-like growth, with strong progress in France and Italy”. The improvement in like-for-like sales that had already been seen in the final quarter of the previous financial year continued. And “at this early stage, there was a notable improvement in Germany”.

Its US business also delivered like-for-like sales growth in the period, which is an important development for a market that has been quite slow to get off the ground and that traditionally has been a tough one for European businesses to crack.

But as expected, the firm’s overall operating profit margin decreased, “with the effect of purchases contracted at a stronger US dollar exchange rate than last year but partially mitigated by cost reductions in both the cost of goods and overheads”.

Taking everything into account, it was a good quarter, if not a perfect one, helped by the firm’s store opening programme. So just how much extra space has it added? The company said retail selling space increased by 0.2 million sq ft since the financial year end and, at January 4, 376 stores were trading from 15.8 million sq ft, compared to 15.1 million sq ft a year ago. 

Three new stores were opened in the period: Seville Lagoh in Spain, Kiel in Germany and Milan Fiordaliso in Italy. And a new store that opened a bit earlier and that was its first store in eastern Europe (in Ljubljana, Slovenia) has “exceeded expectations” so far.

But space expansion isn’t only about new sites and it also relocated to larger premises in Norte shopping centre in Porto, Portugal, the Norwich store in the UK was extended and selling space was actually reduced in two stores in Germany.

It expects to add a net 0.9 million sq ft of additional selling space in this financial year with 18 new stores, plus a number of relocations and further selling space cuts at one store in Germany. It will enter the Polish market with a store in Warsaw this spring, followed by one in Prague, Czech Republic. And it has signed leases for a further store in Poland, in Poznan, and for its first Slovakian site, in Bratislava which will take Primark to its 15th country.

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