Primark sales were boosted by its expansion in the last year

Primark sales were boosted by its expansion in the last year

Value fashion giant Primark has increased full-year sales thanks to its international expansion, but has warned on currency pressures for the year ahead.

For the year ended 12 September, sales grew 13% to GBP5.35bn (US$8.24bn) from GBP4.95bn a year earlier. Like-for-like sales were 1% ahead of last year reflecting a strong performance across a number of countries.

In the early part of the year, like-for-like sales were impacted by an unseasonably warm autumn followed by strong trading across the Christmas period.

Primark said very high sales densities were achieved by stores opened in the last 18 months and, in particular, by its stores in France, the brand's most successful new market entry to date, where like-for-like sales were up 1%.

The fashion retailer expanded its retail selling space by 9% this year with a major increase in its presence in Germany, Belgium and the Netherlands, and at the end of the year it opened its first store in the US.

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The company invested GBP613m during the year, over half of which was spent on Primark's expansion, which included 20 new stores. Italy will be a new market for the brand next fiscal.

“We expect next year’s increase to be even greater,” said Charles Sinclair, chairman of parent Association British Foods (ABF). “We also increased the scale of Primark’s distribution infrastructure to support this growth by extending existing warehouse capacity and opening new facilities in the Czech Republic and the US.

Following Primark’s “exceptional” trading last year, Sinclair said the retailer saw a return to a more normal level of markdowns this year and margin was lower as a result, dropping to 12.6% from 13.4%.

Looking ahead, the chairman said the “substantial moves” in exchange rates, notably the weakening of the euro and emerging market currencies, will have a “significant” influence on group results for the coming year.

“At this early stage we expect the currency pressures to lead to a modest decline in adjusted operating profit and adjusted earnings for the group for the coming year,” Sinclair added.

Bernstein analysts believe Primark will offset more than half of the transactional effects with better buying.

“We model -150bps of margin compression in 2016. While 2015 was a relatively subdued year for Primark, we expect 2016 to deliver better sales growth, despite margin headwinds, and believe investors will focus on US expansion and perceived traction with US customers as an indication of future growth potential.”

Rebecca Marks, consultant at Conlumino, added: "Although Primark actively resists plans to go down the online route that many of its fashion peers have chosen, the retailer shows no signs of slowing down. As parent ABF looks to maintain investment in Primark’s expansion opportunities, Primark will continue to see its budget-priced clothing ardently welcomed in all new territories, with its increased scale of distribution infrastructure helping to meet demand."