Primark today shows the effect of the ‘pingdemic’ on its second half sales, and how it is building its digital capacity for the future. Parent company ABF says operating profits at the store-only value retailer are likely to be ahead of expectations – despite lower than expected sales.
Pent-up demand as stores reopened from lockdowns in the UK and parts of Europe lifted Primark’s third quarter like-for-like sales by 3%, compared to the same period in pre-pandemic 2019, with customers shopping for “very high basket sizes”. But in the fourth quarter, footfall and sales were affected by measures that governments took to protect against the Delta variant of Covid-19, with Primark’s large UK and Spanish markets particularly affected. As a result, fourth quarter sales were down by 17% on 2019.
“In the UK our sales were affected by the rapid and significant increase in late June and early July in the number of people required to self-isolate following contact tracing alerts – the ‘pingdemic’,” says Primark parent company Associated British Foods (ABF) in today’s pre-close trading statement. “Data shows that high street footfall was impacted by the caution displayed by many consumers at that time. The self-isolation rules were then eased in early August. Correspondingly, like-for-like sales showed a consistent improvement through the period from a decline of 24% in the first four weeks of the quarter to a decline of 8% in the last four weeks.”
Primark sales are expected to come to £3.4bn in the second half of its financial year, ABF said in today’s pre-close trading update, for the 53 weeks to September 18 2021. It also says that Primark maintained its share of the clothing, footwear and accessories according to data that includes offline and online sales in the 12 weeks to August 22. ABF says Primark’s operating profit margin is expected to be ahead of expectations. That’s related both to having fewer people working in its stores and lower stock levels, the latter as a result of supply chain disruption.
Primark says its inventory has returned to normal following store reopenings, with £400m in spring and summer clothing that brought forward from last year’s store closures now sold. It has stock in hand from last autumn and winter, but says that it is now seeing delays in autumn and winter inventory as a result of port and container freight disruptions. As a result, it is likely to have £200m less stock than it had expected at the end of the year - and more cash in hand.
The retailer also had fewer people working in its stores in the second half of its year – reducing store labour costs at the same time. This, it says, has been achieved through “natural attrition” – not replacing staff who left the business – and by improving labour scheduling.
By the end of the year, Primark expects to be trading from 398 shops. It has already opened 15 shops this year, including four in the US and 11 in Europe, including its first in Czechia. However, it says Covid-19 restrictions have held back its store opening plans.
Primark says that digital will play a “critical” role in its marketing in the future. It is currently recruiting to its digital team and working through the initial design and development of its new digital platform, ahead of launching a customer-facing website next year. The new site, first announced in July, is set to have improved functionality that will enable it to show both more of the Primark range and to give customers information on stock availability by store. At the same time, Primark aims to strengthen its digital marketing ability so that it can send more personalised messages and other content to customers.