The Irish textile discounter Primark recovered strongly in the first half of the 2021/22 financial year. As already announced at the end of February, the retail chain’s sales and operating result were well above the level of the same period of the previous year, in which the effects of the Covid-19 pandemic had had a significant impact on business. However, the currently sharply rising costs are causing concern: the clothing supplier will counteract the current “inflationary pressure” with “targeted price increases” in the coming months, said the parent company Associated British Foods Plc (ABF) in an interim report on Tuesday.
In the 24 weeks leading up to March 5, Primark generated sales of £3.54 billion (€4.21 billion). Compared to the same period of the previous year, this means an increase of 59 percent. Adjusted for exchange rate changes, revenues grew by 64 percent. However, the clothing supplier has not yet reached the pre-crisis level: sales were four percent below the comparative value for 2019/20, explained ABF. On a comparable area, it had fallen by ten percent.
Sales in the UK and continental Europe remain below pre-crisis levels
“Sales performance was disrupted by the omicron infections in the middle of this half-year, but thereafter like-for-like sales in the UK and Ireland picked up strongly,” said ABF. “However, in continental Europe, the recovery was slower as some restrictions lasted longer and customer footfall remained weaker.”
Overall, like-for-like sales in the UK (-8 percent) and continental Europe (-14 percent) fell short of where they were two years ago. However, Primark was able to grow significantly in the USA: Thanks to numerous new openings, sales there grew by 37 percent compared to the first half of 2019/20. Like-for-like, it still rose by one percent.
In view of the increasing cost pressure, Primark announces “targeted price increases”.
Primark also made strong progress in terms of earnings compared to the same period last year thanks to sales growth and targeted cost-cutting measures: At 11.7 percent, the operating margin reached the pre-crisis level again, the operating profit adjusted for special effects jumped from 43 to 414 million British pounds (492 million euros). However, in view of the sharp rise in material and delivery costs, the parent company expects the operating margin to decline in the second half of the year. According to current knowledge, it will reach a level of around ten percent over the entire financial year, explained ABF. The group also announced measures to stabilize margins: “In view of the increasing inflationary pressure and the stronger dollar, we will carry out selective price increases for some of our autumn and winter items,” says the interim report.
The company also confirmed its expansion plans: The number of Primark stores, which was 402 at the beginning of March, is to be increased further to around 530 over the next five years. “Growth markets” are in particular the USA, France, Italy and the Iberian Peninsula, explained ABF. Market entry in Romania and Slovakia is also planned for this year. At the same time, the clothing retailer is strengthening its internet presence: a new website with additional features has already been launched in Great Britain and is scheduled to be launched in the other markets by autumn. However, opening an online shop is still not on the agenda.