Value clothing retailer Primark achieved double-digit revenue growth in its last fiscal year thanks to excellent trading over the summer months, global expansion and a good performance in its domestic market.
Revenues grew 19% in the year ended 16 September to GBP7.05bn (US$9.26bn) as the fashion chain continued to expand. Having opened 30 stores in nine countries with 1.5m sq ft of selling space, Primark says it still has room for “significant growth” with a “strong” programme of new store openings scheduled for the coming year.
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The retailer hailed “excellent” trading over the summer, particularly in the UK, delivering strong increases in market share. Its decision not to pass on higher input costs arising from sterling weakness against the US dollar, however, impacted margins. But this was less than expected at 10.4% from 11.6% in the prior year.
Primark sales in the UK were 10% ahead of last year on a comparable basis and its share of the total clothing market increased significantly. In continental Europe, sales were up 16% thanks to extensive selling space expansion there.
The retailer opened three stores in the UK during the year and extended its Boston store. Primark says it has learned much about trading in the US since its first opening two years ago and is consequently “fine-tuning” its ranges and store sizes to better meet demand. It will also open its ninth US store in Brooklyn, New York, in the summer of 2018.
The gross transactional effect of the strength of the US dollar was lessened by input-margin mitigation and the strength of summer trading, which resulted in a lower than normal level of markdown. As a result, on a comparable week basis at constant currency, adjusted operating profit was 3% ahead at GBP735m.
Looking ahead, Primark expected to continue expanding its selling space, with margins in line with the current year. An increase is expected in retail profit.
“Primark has the potential for significant growth,” says chairman of parent company Associated British Foods (ABF), Charles Sinclair. “The Primark management team also had further success in mitigating currency headwinds, they delivered on-trend fashion and their stores have never looked better. We look forward to further growth in the coming year.”
Charlotte Pearce, retail analyst at GlobalData, believes that with Primark deciding not to pass on higher costs to consumers this year, it has remained price leader in the UK clothing market.
Moreover, she adds: “By providing value for money in its trend-led clothing, it has been able to steal share from midmarket retailers as shoppers trade down, as well as from value competitor New Look, which has reported an 8.4% drop in UK l-f-ls, signalling it has lost brand appeal and relevance in the market. The retailer has also managed to capture shopper spend from Arcadia fascias which are being overlooked as shoppers looking for fashion-led, value pieces are switching to retailers such as Primark, Asos and H&M.
“With the UK value clothing market forecast to grow 17.6% to 2022, Primark is well-positioned to take advantage of this. However, as more retailers focus on rewarding shoppers through delivery saver schemes and loyalty cards, Primark must keep customers returning with exciting store environments across its portfolio while ensuring consistency in brand identity online and in-store.”
Click here to read just-style’s recent interview with Katharine Stewart, Primark’s director of ethical trade.
