The impressive Primark sales growth over the last half year has been boosted by network expansion with the addition of 16 stores across both Europe and the US – and exchange rates.
The value retailer expects to end the first half with 329 stores, and 13.1 million sqft of trading space – up 12 per cent year-on-year. Like-for-like sales to date are flat compared with last year at a group level, brought down by store cannibalisation in the Netherlands, but fared better at home, up 2 per cent.
But tourists drawn to Britain by the low pound have driven sales up 10 per cent at the company’s two London flagships.
Parent company ABF expects Primark’s sales over the half year to be 11 per cent ahead of last year at constant currency rates. At actual exchange rates, sales are expected to be up 21 per cent.
Kate Ormrod, senior analyst with GlobalData, says margin pressure will remain the big story for Primark in the second half, especially given its commitment to maintaining prices until August.
“That’s a necessary move given the importance of staying price competitive at the value end of the market. As a result, operating profit margin for the full year is expected to fall. Some form of price increase can still be expected on Primark’s more expensive products, with investment in design and fit used to justify any hikes, ensuring shoppers still receive value for money,” she says.
“Being known as the price leader affords Primark some protection at a time when disposable incomes are being squeezed; however, ensuring product ranges remain fashionable and relevant will be imperative to retain appeal.”
Ormrod says this is particularly important as emerging players such as boohoo.com and Missguided continue to encroach on Primark’s fast fashion unique selling point, enabling them to steal customers and share.
“Further investment in menswear to address new trends will be important to build Primark’s fashion credentials, as its offer remains more basics-driven than those of rivals such as New Look and H&M,” she concluded.
