Primark’s retail expansion supports 9 percent revenue growth
Sales at Primark for the whole year ended September 17, 2016 were 5,949 million pounds (7,389 million dollars), 9 percent ahead of last year at constant currency, which the company said were driven by a weighted average increase in selling space of 9 percent with a much higher proportion of this year’s new store openings being in the second half. Revenue also benefited by two percentage points from the 53rd week this year. Group revenue increased by 5 percent to 13.4 billion pounds (16.7 billion dollars) and adjusted operating profit was 3 percent higher at 1,118 million pounds (1,386 million dollars).On an unadjusted basis, operating profit was 18 percent higher than last year.
Commenting on the Group’s annual performance, George Weston, Chief Executive of Associated British Foods, said, “This has been a year of progress for all of our businesses with a substantial expansion in Primark’s selling space, increased margins in all of the food businesses and fundamental structural changes at AB Sugar. The recent decline in the value of sterling presents both benefits and challenges to the group. The diversity of our operations and our broad geographical footprint, combined with a strong balance sheet, equip us well to take advantage of these opportunities as they arise.”
Warm weather mars Primark sales in the UK and Germany
Unseasonable weather and cautious consumer sentiment led to value declines in the clothing retail sector in some of the company’s important markets, particularly the UK and Germany. The company said, warm weather in the pre-Christmas period was followed by a very cold March and April. Like-for-like sales were 2 percent negative overall.
The UK like-for-like performance was in line with this but Ireland delivered a strong sales performance throughout the year, Spain, France and Austria traded well and the Netherlands and Germany were less affected by cannibalisation as the year progressed. As a result of the weakening of sterling, sales were 11 percent ahead when translated at actual exchange rates. The operating profit margin reduced from 12.6 percent to 11.6 percent driven by the devaluation of the euro against the US dollar early in calendar 2015.
Primark said, sterling’s weakening against the US dollar, particularly following the EU referendum, had little transactional impact on Primark’s margins in this financial year but at current exchange rates the effect will be adverse in the new financial year. The company added that reaction of UK clothing retailers to this major movement in exchange rates is currently uncertain.
Retail expansion drives growth at Primark
Primark’s recent openings in the regional malls at Danbury, Willow Grove and Freehold Raceway were received positively. During the financial year, the company opened 1.2 million sq. ft. of selling space, bringing the total estate to 315 stores. A net 22 new stores were opened and two stores, in Oxford and Grimsby, were temporarily relocated to smaller premises pending redevelopment. Primark said, this was another very active year for store development, particularly in the second half when 16 new stores.
New stores this year comprised of first store in Italy, at Arese north west of Milan, Spanish flagship on Gran Via in Madrid, three stores in each of France and the Netherlands, seven in the UK, four stores in the north east of the US and a store in each of Germany, Portugal and Austria. Four stores were extended including a 49,000 sq. ft. increase in the selling space at Creteil in Paris, which doubled the size of the store only two years after its opening. Store development was also focused on upgrading the back-of-house area at the Leeds Trinity store followed by in another 59 new stores. To date, 34 existing stores have been upgraded as part of their planned refurbishment.
1.3 million sq. ft. of new space is currently planned to be opened next year. Five stores are planned for Germany, two more Italian stores in Florence and Brescia, and an 89,000 sq. ft. store in the centre of Amsterdam. Three more stores will be opened in the north east of the US, bringing the total to eight, and an extension to the Downtown Crossing store in Boston is planned which will increase selling space by 20 percent. A 32,000 sq ft extension to the Oxford Street East store will also be opened ahead of the Christmas period.
Summary- 1.3 million sq. ft. of new space is currently planned to be opened next year.
- Expects impact of EU referendum to be adverse in the new financial year.
Picture:Primark
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