Primark has announced its click and collect trial will begin in the run-up to Christmas, with an expectation of bringing more customers into its stores.
The update comes as parent company Associated British Foods (ABF) reported Primark revenues are set to be 40% higher than last year – and that it will absorb inflation into next year without further price rises in order to retain its position of everyday affordability. That will mean profit margins are lower than in the current financial year.
ABF also said that the click and collect service, first announced earlier this year, would first run in 25 stores in both the north of England and in Wales, in a pre-close trading update for the year to 17 September.
The service builds on stock-checking functionality that the fashion retailer has been “enthusiastically adopted” since the new Primark website launched in April.
“Our initial judgement has been confirmed that customers have welcomed its [the new website’s] new features,” ABF said in its trading update. “The key metrics, such as traffic and engagement, have steadily built from a strong start.”
The strategic approach to trialling click and collect comes as the retailer plans to grow its store numbers to about 530 by the end of its 2026 financial year – up from more than 400 today. Most new stores will be in its growth markets of the US, France, Italy and Spain.
Furthermore, the update comes as Primark expects to turn over £7.7bn this year – 40% ahead of the previous year, which was hit by Covid-19 lockdowns that left its only sales channel closed for weeks at a time. Operating profit margins in the full year will be in the order of 9.6%. An 8% margin in the second half reflects weaker than expected sales in continental Europe as customer spending patterns change in the wake of Covid-19. Continued restrictions and heatwaves have affected its Iberian stores, while French and German clothing sales have continued to lag behind pre-Covid levels.
Primark working capital requirements increased to about £440m, both as the result of the late arrival of inventory at the end of 2021 following supply chain issues (£200m) and the earlier than usual arrival of inventory at the end of the financial year (£240m).
Additionally challenges include cost inflation in energy, raw materials and labour, while both sterling and the euro have weakened against the dollar. It now plans to absorb this inflation and will not increase prices next year beyond those already planned.
“We believe this decision is in the best interests of Primark and supports our core proposition of everyday affordability and price leadership,” ABF added in the statement. That will mean profit margins in the current year are lower than 8% seen in the second half of the year, although it plans to return to 10% as commodity prices fall and consumer confidence improves.