UK: ABF reports Primark sales growth
Value fashion retailer Primark today (19 January) reported a rise in sales in the 16 weeks to 7 January, but admitted that operating margin fell as a result of higher cotton costs.
Parent company ABF said Primark sales rose 16% during the period. Like-for-like sales growth was "good" and "particularly strong" over Christmas after a slower start to the financial year due to the "unusually warm" autumn.
The company said that "as expected", operating margin was lower than the same period of last year, reflecting the continued absorption of higher cotton costs. "Cotton prices have fallen somewhat from their high point last year and we will begin to see the benefit of lower input costs in the second half," it added.
The 16 weeks saw nine new stores open, with two in Spain, three in Germany, one each in Portugal and the Netherlands and two in the UK. There are also plans to open three stores in Spain in March.
Consolidated sales, which include ABF's sugar, agriculture, grocery and ingredients rose 12%.
Commenting on the results, Conlumino lead consultant Matt Piner said: "Primark's fast fashion model remains sharply relevant, even as rival value players, such as Peacocks, falter.
"It offers financially pressed young shoppers a way to be able keep up with the latest trends in a way few others do. With cotton prices now falling again it can also begin to focus on restoring margins and profitability."
However, Charles Stanley analyst Sam Hart said that while there is potential for Primark to benefit from lower cotton prices, the "competitive environment is unlikely to ease in the near term and hence could see some of these gains reinvested in promotional activities".
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