In a trading update by parent company Associated British Foods (ABF) for the 16 weeks to 7 January 2023, Primark noted that trading was good in all markets and ahead of expectations with a 15% rise in retail sales on last year.
In the UK, Primark said much of this growth was like-for-like. The retailer’s share of the total UK clothing, footwear and accessories market by value, which includes online sales, for the 12 weeks ended 11 December 2022 reached 7%, up from 6.5%, and very close to the record trading when stores reopened in June 2021 after a prolonged lockdown.
This year footfall was strong in both the UK and the Eurozone, unit volumes increased, and sales were 18% ahead of last year at actual exchange rates and 15% ahead at constant currency.
Primark like-for-like sales were 11% ahead, supported by higher unit volumes, higher average selling prices and a normalised level of markdown. Sales in the week leading up to Christmas Day reached a new record.
Excluding the UK, sales in Europe were up 16% with growth in all markets thanks to an extensive programme of store openings. Like-for-like sales were 8% higher.
In the US, sales growth reached 4% given the strength of prior year comparatives which were supported by Covid-related government stimulus.
Adjusted operating profit margin in the period was better than expected as a consequence of the sales performance. As expected, the margin was somewhat lower than in the same period last year as a result of inflation in the cost of bought-in goods driven by the significant strengthening of the US dollar against sterling and the euro, and higher freight rates, labour and energy costs.
Primark’s digital capability continues to develop, and a new site has just been launched in the Republic of Ireland, to be followed in the coming months by Germany, Spain, and the US, with remaining markets expected by the middle of the calendar year.
In this financial year, Primark plans to open a further 17 stores: seven in the US, three in France, three in Spain, two in Italy, one in Romania, and its first store in Slovakia, which becomes Primark’s 16th market, in Bratislava. The retailer recently signed a lease for its first store in Hungary, making this Primark’s 17th market, in Budapest.
In its trading update, the company said: “To date, Primark trading has been good in all our markets and was ahead of expectation. We had a very strong Christmas period. We believe our proposition of great quality at affordable prices and attractive store experience is proving increasingly appealing to both existing and new customers. Early trading in this new calendar year has been encouraging but macro-economic headwinds remain and may weigh on consumer spending in the months ahead. We had an accelerated programme of store openings in the period and remain on track to add a net 1 million sq ft of retail selling space in this financial year.”
Attractive value proposition
Louise Deglise-Favre, apparel analyst at GlobalData, believes Primark’s position as a value retailer will help it navigate 2023 as it will attract shoppers wishing to trade down to its wide ranges suitable for all ages and genders, and its desirable trend-led pieces.
“In Europe, Primark registered a 16% increase in sales, 8% on a like-for-like basis, which is encouraging given that the region performed relatively poorly in its FY2021/22, with sales remaining 16% below pre-pandemic levels. Performance in Europe was boosted by an increase in footfall, as well as its winter ranges resonating well with consumers. In the US, sales grew by 4%, which is slightly underwhelming given the region’s three store openings throughout the period. However, it was up against a strong period of trading in the lead-up to Christmas 2021 as consumers’ finances had been boosted by the numerous rounds of federal stimulus payments. Primark plans to continue its rapid expansion with the goal of doubling its selling space in the country by the end of FY2022/23, which while ambitious, could bring huge benefits as its value proposition blended with good fashion credentials has so far well resonated with American consumers.
“Primark stated that it remains committed to improving its online proposition, rolling out the improved website that it launched in the UK in 2022 to the US, Germany, and Spain in the coming months. While the new website is undoubtedly an improvement on its predecessor, consumers will still be disappointed that it is not transactional. Surprisingly, Primark also remained quite vague about the performance of the click & collect trial of childrenswear products it launched in 25 UK stores in November 2022, stating that it was “encouraged” by it but not disclosing any future expansion or cancellation plans. This lack of communication around the retailer’s first venture into online retail leaves room for speculation around its success and hopefully only means it is too early to determine if Primark will commit to offering the service permanently or not.”