Primark booms in UK, Europe, has plan for Germany, will expand in US
PrimarkAssociated British Foods
For the Primark unit, sales were up 19% to £4.228 billion, reflecting good growth in all countries. And it said it saw strong like-for-like sales growth driven both by price and volume, while new stores are performing strongly, “with some exceptionally high sales densities”.
The budget retailer made adjusted operating profit of £351 million with a margin of 8.3%. This was higher than expected but lower than the prior year’s 11.7%.
And in an important announcement, it said its US expansion is continuing into the southern states and will be anchored by a new warehouse.
It also announced a restructuring and growth plan for Germany.
Looking at the detail of the half year, Primark said “trading was significantly better than expected driven by good footfall and the appeal of our proposition to new and existing customers. This represented a material improvement in both the UK and Europe on the second half of the last financial year”.
The first half began with good sales in September, followed by a softer, warm October, and better trading in November and December. The New Year started very strongly with a slight softening in February, but more recently, “we have seen a positive reaction to” the SS23 ranges.
Like-for-like sales were 10% on higher prices and higher unit volumes. Footfall increased in the UK and Europe and like-for-like sales for the half year returned to levels broadly in line with pre-pandemic.
Its weighted average retail selling space rose 3.4% and all the new stores opened in the period are performing well.
In the UK, total sales were 15% ahead, driven by 15% like-for-like sales growth. Footfall strengthened on high streets and in retail parks and was significantly better in destination city stores, “which are now busy as tourists and office workers have returned”.
Its share of total UK clothing, footwear and accessories by value rose from 6.2% to 6.5% this year.
It was boosted by its large markets of Spain, France and Germany. In Spain, it increased its market share from November to the end of January with sales 14% higher against overall market growth of 5%.
It opened 10 stores in Europe in H1, all of which have shown “very strong and sustained customer demand”. It also added more than 100,000 sq ft of retail selling space in France, with Saint Etienne performing “particularly well”.
In Germany, like-for-like sales recovered, increasing 13%, “but sales densities across the estate remain too low as a result of the size of some existing stores and their proximity to one another”.
The company’s new plan for Germany is “to optimise the retail selling space of some stores and reduce the number of stores, which stood at 31 at the end of the period”.
It closed Weiterstadt in the half year and Steglitz Berlin after the period end. It’s consulting on plans to close a further four: Gelsenkirchen, Frankfurt Nord-West-Zentrum, Kaiserslautern and Krefeld. And it has reduced the size of the Hannover store with plans to reduce more store sizes “in due course”.
But its said it’s “committed to the German market. A large proportion of German shoppers do not live within a convenient distance of a Primark store and so we will invest in new stores in locations where there is little risk of cannibalisation”. These will be smaller than the average in Primark’s estate in Germany “and the merchandise will be selected to appeal to local customer demand”.
Meanwhile, as mentioned, in the US, it’s doing well. Total sales were 11% higher with good trading across the 16 stores.
It has opened more stores in its northern base but is expanding elsewhere with a lease signed for Orlando, Florida, and it expects to sign leases for stores across southern states of the US, including Texas.
The company also said its digital development continues and it has recently rolled out its improved website beyond the UK to Ireland, Germany and Spain, with Italy, the US and France to follow. All remaining markets will follow over the summer.
It’s seen a significant increase in customer traffic where the new website has been introduced, and the stock checker facility is being heavily used.
And its click & collect trial of kidswear in 25 stores in the north of England and Wales continues with encouraging results. It’s extending this trial to 32 UK stores (broadly within the M25 region) by late summer.