Primark’s parent company today says that consumer spending has been “more resilient… than anticipated” in the first half of its financial year, with the value fashion retailer’s sales 19% ahead of last time. But it warns of pressure on costs. The retailer continues both its click and collect trial and the roll out of its website to new markets.
Associated British Foods (ABF) says it expects Primark sales to come in at £4.2bn in a trading update for the half year to March 4 2023. That will be 19% up on the same time last year – or 16% in constant currency – while sales across the group are expected to be more than 20% up on last time. The number of people visiting Primark shops grew “strongly”, a year on from a half-year that was “disrupted by the consumer reaction to Omicron” and as public health measures stayed in place into the spring in some of its European markets. It expects sales to rise across markets including the UK (+15%), Europe (+18%), and the US (+12%). In the UK, it cites Kantar figures suggesting that Primark had 6.8% of the UK clothing, footwear and accessories market by value – including online sales – in the 12 weeks to January 8. That’s up from 6.3% a year earlier, and reflects strong footfall in city centres, high streets and retail parks.
Multichannel strategy
Primark’s own online development continues, with its improved website expected to roll out to Germany, Spain, France and the US soon before extending to its remaining markets by the mile of 2023. Its click and collect trial, launched in 25 UK stores in November, continues.
The retailer has now opened more stores, taking its retail selling space to an expected 17.8mn sq ft by the end of the first half, up from 17mn a year earlier following openings in locations including Bucharest, Romania, and Bari and Caserta in southern Italy.
Rising costs
But ABF adds that while customer spending is proving resilient, there are also “significant cost pressures”. While the costs of sea freight and energy have both fallen, the goods it buys in are higher because the strength of the US dollar against sterling and the euro, and because of higher wage costs. That will hit profit margins, with adjusted operating margins at Primark now expected to narrow to more than 8% of sales, from 11.7% a year earlier, in the full year. Despite this, adjusted operating profits are expected to be higher in the second half because of higher sales and as a result of some lower operating costs.
