Primark expects 9 percent increase in full year sales

Primark, part of the Associated British Foods has said that sales for the full year are expected to be 9 percent ahead of last year at constant currency. Like-for-like sales are expected to be minus 2 percent, affected by unseasonable weather - warm weather in the pre-Christmas period and a very cold March and April.

Primark said, while Ireland delivered a strong performance throughout the year, Spain, France and Austria traded well and the Netherlands and Germany improved. The UK performance was in line with the group with good trading in periods of more typically seasonal weather. As a result of the weakening of sterling, the company expects sales at actual exchange rates to be 11 percent ahead of last year.

Second half witnesses aggressive retail expansion

The operating profit margin this year is expected to be close to that achieved in the first half. The company also noted that transactional impact on Primark’s margins from the weakening of sterling against the US dollar, particularly since the EU referendum, will have no effect in this financial year as a result of its practice of taking out forward currency contracts when garment purchase orders are placed. However, it expects the margin to be adversely affected in the new financial year at current exchange rates.

During this financial year, the company would be operating 315 stores. A net 22 new stores have been opened and there have been two temporary relocations in Oxford and Grimsby pending redevelopment. The second half of the year was a very active period with the opening of 16 new stores. New stores this year comprised of first store in Italy, at Arese northwest 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 northeast 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. In the US, Primark says that though awareness about the brand started at a low level, it has continued to grow. The company is encouraged by the most recent openings in the regional malls at Danbury, Willow Grove and Freehold Raceway.

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 notably an 89,000 sq. ft. store in the centre of Amsterdam. Three more stores will be opened in the northeast of the US, bringing the total to eight, and an extension to the Downtown Crossing store in Boston is planned. A 32,000 sq. ft. extension to the Oxford Street East store will also be opened ahead of the Christmas period.

Group earnings per share expected to be ahead

The underlying operating performance of the group has been ahead of the company’s expectation in the second half and the further weakening of sterling during the period since the EU referendum has resulted in a translation benefit. With no material transactional effect in the period, as a result of forward currency purchases and fixed contracts, the company’s expectation for the full year results is now for earnings per share to be marginally ahead of last year.

If current sterling exchange rates continue, the company expects it to have both positive and negative effects on the group’s operating profit next year. There would be an adverse transactional effect on the profit margin on Primark’s UK sales, a favourable transactional effect on British Sugar’s margins and a translation benefit on group profits earned outside the UK.

Picture:Primark