Currency and costs weigh on mixed H1 for Primark
- H1 profit down 3.1% to GBP313m
- Revenue grows 5% to GBP2.67bn
- Analyst says numbers reflect a bearish retail environment
Primark's profit fell 3.1% during the first half
A drop in first-half profit at UK value fashion retailer Primark reflects its investment to expand into the US as well as an increasingly bearish environment for clothing retailers.
The UK's largest apparel and footwear specialist retailer today (19 April) reported that net profit amounted to GBP313m (US$449.4m) for the 24 weeks ended 27 February, compared to GBP323m in the prior year period.
Revenue, meanwhile, rose 5% year-on-year to GBP2.67bn from GBP2.55bn, driven by increased retail selling space. Like-for-like sales were less than 1% below last year, weighed down by unseasonably warm weather across northern Europe in the run up to Christmas.
Management reaffirmed that US dollar pressure was mitigated by better buying and lower markdowns, and stated that the net cost of its US head office and warehouse opened last year was also included in the net cost.
With the exchange rates applicable to most of Primark's purchase orders for the second half already having been fixed, the retailer said it would expect any further impact on its margin for the rest of the financial year to be limited.
It added that the rate of its selling space additions will increase and the pipeline of new store openings is strong, both for the second half of this year and next year.
"These results demonstrate underlying progress for all of our businesses in the period despite currency," said George Weston, chief executive of parent company Associated British Foods (ABF).
Jon Copestake, chief retail and consumer goods analyst at the Economist Intelligence Unit, added: "Primark's profit decline comes despite a rise in sales and could be partially attributable to the investment the retailer has made, notably in opening its flagship store in the US. While the numbers are of a concern they reflect an increasingly bearish environment for clothing retailers."
Meanwhile analysts at Bernstein Research noted: "US dollar pressure should lessen for the remainder of the year, and as more stores are opened in the US, Primark should be able to better leverage these central costs."
In an exclusive interview with just-style last month, Paul Lister, who is responsible for Primark's ethical trading team and CSR at ABF, explained why "the strength of a brand's ethics is not about a price point" – and that close engagement with the supply chain is key.
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