Primark expects decline in full-year UK like-for-like sales

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Primark owner AB Foods expects decline in UK like-for-likes
AB Foods' pre-close trading update for Primark contained both good news and bad.
// Primark’s parent company AB Foods said sales for the year are expected to rise by 4%
// This has been attributed to the opening of 14 new stores worldwide
// However, on a like-for-like basis, excluding new stores, sales fell 2% – with UK like-for-likes down 1%

Primark is expected to defy the high street gloom, as bosses at parent company AB Foods anticipate an uptick in full-year sales thanks to the opening of 14 new stores.

However, excluding the news stores, AB Foods said that on a like-for-like basis Primark’s full-year sales are expected to fall two per cent – with like-for-like sales in the UK dipping one per cent.

According to a pre-close trading update that covers the year to September 14, AB Foods said full-year sales at its retail division – or Primark – are likely to be up four per cent both on a reported and currency-neutral basis.

It added that fourth quarter sales growth had been faster than in the previous nine months of the financial year due to an improving like-for-like performance, while early trading of the new autumn/winter range “has been encouraging”.

Despite the anticipated decline in UK like-for-likes, AB Foods said Primark “has performed well” in the UK against a backdrop of a weak fashion market.

The firm also said Primark continued to deliver a “significant” gain in market share, with sales growth of three per cent.

The overall sales growth was driven by new selling space created from new stores, including the Birmingham High Street which recently opened as Primark’s biggest store worldwide.

Meanwhile, AB Foods said Primark’s overall sales in the Eurozone were expected to be five per cent ahead of last year at constant currency, with particularly strong sales growth in Spain, France, Italy and Belgium.

However, like-for-like sales fell by three per cent, driven mainly by a weak performance in Germany.

On the other side of the Atlantic, Primark’s US arm continued to deliver strong sales growth and like-for-like growth.

Primark is slated to open its 10th US store at American Dream, New Jersey this autumn followed by Sawgrass Mills, Florida later in 2020, and the value retailer has exchanged contracts on an upcoming store in State Street, Chicago.

In terms of profit margins, AB Foods said Primark’s first-half operating margin of 11.7 per cent easily beat last year’s 9.8 per cent as a weaker US dollar, “better buying and tight stock management” all helped.

However, margin in the second half will be lower reflecting the effect of a stronger US dollar on purchases.

“Stock has continued to be managed tightly and markdowns in the second half are now expected to be in line with the good performance last year,” AB Foods said.

“Our full-year outlook for operating profit is unchanged, with margin ahead year-on-year.”

Of the 14 brand new stores Primark opened during the year, four were in the UK; three in Germany, two in Spain, two in France and one each in Belgium, the Netherlands and its debut store in Slovenia.

In the next financial year, AB Foods said it wanted to add a net 1 million sq ft of additional selling space for Primark, via the opening of 19 new stores together with a number of relocations and extensions.

Most of these will occur in Spain and France, as well as Rotterdam Forum in The Netherlands and Trafford Centre in the UK.

Primark is also slated to enter its 13th market with its very first store in Warsaw, Poland.

AB Food is scheduled to reveal the full details of its annual results on November 5.

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