The Irish textile discounter Primark is expected to close the current 2021/22 financial year with a strong increase in sales. Currency-adjusted growth of 40 percent to around 7.7 billion pounds sterling (8.9 billion euros) is expected, said the parent company Associated British Foods Plc (ABF) in an interim report on Thursday. After deducting the sales contribution of the additional sales week in the past year, the sales of the clothing chain increased by 44 percent after currency adjustments. The company justified the significant increase with the elimination of the Covid-19-related restrictions that had affected business in the previous year and the resulting normalization of consumer behavior.
In recent months, however, the pace of growth has slowed considerably. For the fourth quarter ended Sept. 17, Primark’s like-for-like revenue is expected to have increased just 7 percent year-on-year, ABF said. The clothing retailer has achieved “sustained improvements” in the UK, but the results in continental Europe have been “weaker than expected,” the company said. Customer traffic did not improve further in the region in the fourth quarter, and there are certain signs of more cautious buying behavior. Business again developed relatively poorly in Germany. The company therefore announced that it would “assess options in the coming months to reposition the business for success in this important market”.
Together with the preliminary results, the retailer gave an outlook for the coming financial year. For 2022/23, Primark therefore expects sales growth based on new store openings and the price increases that have already been implemented and announced for next spring. The company has already taken action to address “the challenges posed by supply chain disruptions, inflation in raw material and energy prices and higher purchasing costs resulting from the strengthening of the US dollar against the British pound and the euro during the financial year. to cope with,” said the group. In addition to the price increases that have already been announced, increases in efficiency in the branches and a reduction in operating costs are also planned.
Overall, however, management expects a further negative impact on earnings: “Due to the timing of the most recent currency and energy price developments and the business decision to limit further price increases next year, we now expect that Primark’s profit margin next year will be below that for the expected operating profit margin of 8.0 percent in the second half of this fiscal year,” the company said. ABF intends to present its full annual report for 2021/22 on November 8th.