A ‘Very Strong’ Christmas For Primark—Sales Hit $3.9 Billion Helped By Price Rises

Value fashion retailer Primark has reported a strong Christmas season with sales up 15%* to £3.15 million ($3.9 billion) in the 16 weeks to January 7. They were driven by an increase in average selling prices, higher unit volumes, and a move to ‘normalize’ the level of markdowns in its 416 stores.

In a trading update issued on Tuesday by food-to-fashion parent Associated British Foods (ABF), the company said: “Primark trading has been good in all our markets and was ahead of expectation. We had a very strong Christmas period.” During the 16 weeks, Primark accounted for 47.2% of ABF’s total revenue.

In the core markets of the U.K. and European Union, Primark saw strong footfall partly reflecting the negative effect of the emergence of the omicron variant last year which hit traffic flows. The result was that a new sales record was set for the week leading up to Christmas Day.

In Britain, Primark’s biggest market, 15% growth, all like-for-like, allowed the retailer to come very close to the record trading it had when stores reopened in June 2021 after a prolonged lockdown. ABF said: “Footfall is now strong in major city centers as well as on high streets and retail parks.”

Aarin Chiekrie, equity analyst at financial services company Hargreaves Lansdown, commented: “Primark saw record sales towards the end of 2022, as cash-strapped customers flocked to the budget fashion store to escape cost-of-living pressures.”

The downside was that adjusted operating profit margin was lower than in the same period last year due to inflation in the cost of bought-in goods, partly driven by the strengthening of the U.S. dollar against both sterling and the euro, plus higher freight rates, labor and energy costs.

United States gets biggest share of new stores

Europe, excluding Britain, generated 16% sales growth though like-for-like sales were just 8% higher thanks to an extensive store opening program in this region—12 new stores were inaugurated over the past 12 months. Particularly strong new locations have been Bucharest in Romania, and Caserta, near Naples in Italy.

The United States proved less buoyant with sales growth of 4% due, in part, to the strength of prior year numbers which were supported by Covid-related government stimulus. In the current financial year (ending mid-September) ABF said it would nearly double selling space in the U.S. with another seven stores planned in this key market. Three Primark stores recently opened in the New York area: Roosevelt Field, Long Island; Jamaica Avenue, Queens; and City Point, Brooklyn and the company also extended its store at Sawgrass Mills in Florida.

In total, 17 stores are set to open by September: seven in the U.S., three in France, three in Spain, two in Italy, one in Romania, and the brand’s first store in Slovakia—which becomes Primark’s 16th market—in the capital Bratislava. This will add roughly one million square feet to the retailer’s 17.7 million square feet of selling space in the current year. A lease for Primark’s first store in Budapest, Hungary, has also been signed.

Digital remains a work-in-progress for Primark after some reluctance to start. The new UK website has seen traffic increase by 85% since last year, but it is not clear whether the click-and-collect trial of children’s products in 25 stores in the U.K. will be extended further. A new site has just been launched in Ireland, to be followed in the coming months by Germany, Spain, and the United States. Other markets should seen a Primark online presence by June.

Source: https://www.forbes.com/sites/kevinrozario/2023/01/24/a-very-strong-christmas-for-primark-sales-hit-39-billion-helped-by-price-rises/