• Primark reported a 4% increase in operating profit to GBP341m (US$489.1m) for H1.
  • Total sales were 7% ahead of last year at constant currency.
  • Like-for-like sales declined a slightly worse than expected 1.5% as sales were held back by unseasonably warm weather in October.
Primark saw earnings and sales climb in its first-half

Primark saw earnings and sales climb in its first-half

Value clothing retailer Primark has increased earnings in its first-half against a backdrop of unseasonable weather in Europe and a margin decline following the adverse effect of currency on purchases.

For the 24 week period ended 3 March operating profit reached GBP341m (US$489.1m) from GBP323m a year earlier, representing an increase of 4%.

Operating profit margin was line with the same period last year at 9.8% compared to 10%, as forecast, with better buying virtually offsetting the adverse effect of the US dollar exchange rate on purchases. Stock was tightly managed in the period and markdowns were in line with those of the first half last year.

Meanwhile, UK like-for-like sales were up 3% in the six month period, down sharply on 10% growth seen in the prior year. Like-for-like sales for the group declined a slightly worse than expected 1.5% for the 24 weeks as sales were held back by unseasonably warm weather in October with a significant decline in the like-for-like measure during the month.

Owner Associated British Foods (ABF) said Primark's performance in the UK was "remarkable" in the circumstances and expects profit growth to accelerate in the second half driven by better buying and some benefit of the recent weakness of the US dollar.

Total sales were 7% ahead of last year at constant currency, driven by increased retail selling space, and 8% ahead at actual exchange rates.

Primark has continued to develop its US store offering and says it expects to reach an agreement soon to open a store in Sawgrass Mills, Florida, in late 2019, which will provide the opportunity to trade in another type of retail environment - in both mall format and geographic location - to its existing stores. In continental Europe, sales were 6% ahead of last year mainly driven by increased retail selling space, partially offset by like-for-like decline in northern Europe, Primark noted.

The group expects a total of 1.2m sq ft of new selling space to be added during the financial year, with a "strong" programme planned for the second half.

Sofie Willmott, retail analyst at GlobalData, notes despite much of the retailers' recently reported growth in the clothing and footwear sector being driven by the online channel, Primark has demonstrated once again that it does not need a transactional website to thrive in the UK market.

"As shopping habits continue to shift online, clothing and footwear spend in physical locations is forecast to decline until 2022, with the little growth expected in the sector overall set to be generated solely online," she adds. "But Primark continues to buck this trend, benefitting as shoppers with squeezed disposable incomes trade down, and stealing share from its high street competitors including New Look and H&M whose customers have become disillusioned with lacklustre product ranges."

However, despite its all-round strong performance in the UK, Primark's sales abroad have not been quite as promising.

"Given the ever-unpredictable and uncontrollable nature of the weather, retailers must be prepared for all eventualities to mitigate the negative impact this element can have," Willmott adds.