Retailer Primark has proved it is adept at capitalising on shoppers trading down to its value fashions as it revealed record sales in the week before Christmas.
The UK’s biggest clothing retailer by volume, Primark achieved total sales growth of 9% year-on-year for the 16 weeks to 6 January thanks to an increase in retail selling space. At constant currency, sales were 7% ahead of last year.
The retail chain, which is owned by Associated British Foods Plc (ABF), said domestic sales continued to perform well with strong like-for-likes, and a strong increase in market share – but that sales growth in Europe was held back by unseasonably warm weather in October. Trading in the US has “continued to make progress.”
Decent trading in the five weeks to Christmas, however, got the retailer back on track with “record” sales in the week before Christmas, and the retailer is now expecting operating margins – which have been under pressure from unfavourable exchange rates – will be in line with the 10% achieved last year.
Primark is hoping better buying will virtually offset the adverse effect of the weaker sterling/US dollar exchange rate on purchases.
The retailer’s selling space increased by 0.3m sq ft since the financial year end and, at 6 January 2018, 350 stores were trading from 14.2m sq ft, compared to 13.1m sq ft a year ago. Primark is expecting to open 1.2m sq ft in this financial year.
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By GlobalDataUnlike many retailers on the high street, Primark has shown it does not need the online channel to prop up its performance,” points out Kate Ormrod, lead retail analyst at GlobalData. She adds that as bricks and mortar retailing remains its sole channel, it is continuing to seek out UK expansion opportunities.
Primark’s Christmas results are in contrast to those of more sluggish sales reported by other UK clothing retailers over the festive period, such as Marks & Spencer, Debenhams and House of Fraser.
Ormrod adds: “The reporting of strong UK like-for-like growth in Q1, following 10% total domestic growth in its 2016/17 financial year, caps off an excellent 2017 for Primark and ensures it remains on course to overtake Next as the UK’s second largest clothing retailer in 2018.
However, she warns: “Primark needs to be mindful of stores becoming a burden in the long run if it ever decides to venture online.”
