As expected, the Irish textile discounter Primark closed the 2021/22 financial year with strong growth in sales and earnings. In the previous year, however, business was still significantly affected by the effects of the Covid 19 pandemic.
However, the German market continues to cause problems for the retailer. The company had to make high value adjustments here and now wants to implement further reforms. This emerges from the current annual report published by the parent company Associated British Foods Plc (ABF) on Tuesday.
Post-pandemic recovery: Business is back to normal in the UK, Ireland and the US
In the past financial year, which ended on September 17, Primark’s sales amounted to almost 7.7 billion British pounds (8.8 billion euros). It thus exceeded the level of the previous year by 38 percent. Adjusted for exchange rate changes, revenues grew by 40 percent. In 2020/21, the retailer had suffered badly from the pandemic-related restrictions in brick-and-mortar retail because, unlike its competitors, it does not have its own online store.
The company was largely satisfied with the business development in Great Britain, Ireland and the USA. Things were not looking so good in continental Europe. The company explained that consumer confidence there is currently weaker than before the pandemic. Like-for-like sales in the region were 16 percent below the level of 2018/19.
“Unacceptable level”: The German business still needs reform
Primark continues to be particularly worried about the German market. After the initially very successful market entry in 2009, the retailer had opened above-average branches in Germany, which has been causing problems for years in view of the weakening demand. The company admitted that the profitability of the locations in Germany had fallen to an “unacceptable level” due to falling area productivity.
In light of this, Primark has now taken write-downs totaling £206m on its German assets and announced further action. The company said it was examining options to downsize branches in Germany or to close them entirely. At the same time, the retailer emphasized that he “continued to see real opportunities” in the German market. It is therefore planned to invest in increasing brand awareness and customer loyalty.
Sales are expected to increase strongly in the current year as well
Despite the difficulties in Germany, the textile retailer was able to increase its annual result significantly. At 756 million pounds sterling, the operating profit adjusted for special effects was more than twice as high as in the previous year (+136 percent). Reported earnings before taxes jumped from 235 to 474 million pounds sterling (543 million euros).
For the new financial year, Primark expects further “significant sales growth”, which is said to be based on the price increases already made and additional branches. A total of 27 new openings are planned over the course of the year, ten of them before the upcoming Christmas festival. However, the company warned that the profit margin could be lower than recently.