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Primark sales up and international expansion “well advanced”

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Primark is seeing stellar growth as it expands across Europe and, later this year, into the US – expansion that is “well-advanced”, parent company AB Foods said.

The discount retailer’s first-half adjusted operating profit rose 11% to £322m, excluding the impact of currency fluctuations. The unit reported a 15% sales increase in the period, although like-for-like sales were unchanged, held back by northern Europe’s unseasonably warm weather through autumn, and the impact of new stores on existing ones. Like-for-like sales over the important Christmas trading period were strong.

The fast fashion chain made “significant progress” in operating profit, said George Weston, CEO of Primark’s owner AB Foods.

The UK delivered a positive like-for-like performance and Spain, Portugal and Ireland all performed very strongly. As new stores opened in the Netherlands and Germany, sales in existing stores declined as customers chose to shop more locally rather than travelling the long distances that were seen in the early days of trading in these countries.

This is consistent with the normal trading pattern that was noted in the early days of Primark’s expansion into new countries. The impact of sustained US dollar strength will increase costs for the autumn/winter season and will be seen in the fourth quarter of this financial year and into the following financial year.

In a statement, Primark’s Chairman Arthur Ryan said “The expansion of retail selling space and the superior trading by the stores opened in the last 12 months drove strong sales and profit growth for Primark.”

He added:

“We will not allow currency changes to impact our model of providing up-to-the-minute fashion at the best value to our customers in each of our markets. Retail selling space increased by 0.5m sq ft since the last financial year end and by 1.1m sq ft since the 2014 half year. At 28 February 2015, we were trading from 287 stores and 10.7m sq ft of retail selling space. We opened ten new stores in the period including the relocation of the Northampton store to much larger premises. We opened four stores in the Netherlands, increasing space by some 60% and bringing our total there to 12, and three stores in Germany including 80,000 sq ft in Dresden. Further store openings or extensions to existing stores will take place in Germany, Belgium and the UK in the second half. Total new selling space to be opened in the financial year will be less than 1m sq ft. We have an extensive pipeline of new stores to be opened over the next few years with a strong programme of some 1.5m sq ft scheduled for the next financial year. Significant investment was made in the first half to expand warehouse capacity in Europe and further expenditure is planned for later in the year.”

At the beginning of this year the capacity at Torija in northern Spain was doubled and the extension of the British retailer’s Mönchengladbach warehouse in Germany, which increased capacity by 60%, is now fully operational. Primark plans to open a new warehouse in the autumn, located in Bor on the western border of the Czech Republic, which will service stores in Austria and Germany. Ryan added that “good progress” was made in building the management team in the US in anticipation of the launch in late 2015.

Published on Tuesday 21 April by Veebs Sabharwal

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