Unseasonable weather in May has adversely affected Primark’s like-for-like Q3 sales, compared with a ‘favourable market environment’ last year, the company has reported in its year-to-date trading update for the 40 weeks to 22 June 2019.
Primark’s sales for the year-to-date increased 4% at constant currency and actual exchange rates. Associated British Foods, which owns Primark, attributed the rise to increased selling space partly offset by the like-for-like sales decline.
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The retailer said it has experienced an improvement in June sales due to strong trading at its new stores, saying: “Trading at our new stores was strong and we have been encouraged by our customers’ reaction to the full product range and the new food and beverage and beauty services offered in Birmingham High Street.”
GlobalData senior retail analyst Chloe Collins said: “Primark’s fast fashion, value offer continues to prove a winning combination, with year-to-date sales growth maintained at 4% by the end of its third quarter in line with half one growth. With like-for-like sales remaining a challenge in both the UK and the Eurozone due to the late arrival of summer weather, growth has been driven by the retailer’s ongoing expansion, with selling space increasing by 0.8m sq ft since the beginning of FY2018/19.
“Although operating margin in half two was originally expected to decline due to a stronger US dollar rate in comparison, this has been offset throughout Q3 by Primark’s improved buying processes and markdown reductions – leaving the full year view now more positive. With everything to play for in its final quarter, Primark remains in a good position to overtake M&S as the UK’s clothing market leader in 2019.”
Primark’s in-store experience investments predicted to pay off
Collins added: Primark’s new flagship store in Birmingham, which opened in April, has exceeded expectations, with positive reactions to the in-store beauty bars and cafés. With shoppers now favouring experience-led retail, Primark is wise to have extended this further with the opening of its Friends-themed replica Central Perk café in Manchester which opened within the last two weeks of the reporting period. With negative like-for-likes, Primark must continue to introduce leisure services into more of its estate, with unique appeal necessary to continue to boost footfall.
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By GlobalData“The response to Birmingham’s fuller product range has also been strong, with the offer including more stationery, toys and technology than its usual sites. With this wide assortment, Primark has the potential to steal sales from general merchandisers and the struggling department stores Debenhams and House of Fraser and should start to expand these categories in more stores to aid growth.
“Primark has added 0.5m sq ft of space during Q3, with nine new store openings, including a successful first location in Slovenia. As its first Central European store, Primark now has the opportunity to learn about the preferences of these consumers in order to plan further expansion in the area, with openings in Poland and the Czech Republic already on the agenda.
“With trade in Germany still challenging and a new store in Bonn planned to open by the end of the financial year, Primark should be cautious throughout FY2019/20, and refrain from signing new leases here, as well as be proactive in closing any underperforming stores,” concluded Collins.
