Primark has to make further cuts in the German branch network and is closing four branches. Only a few weeks ago, the Irish textile retailer spoke of reviewing strategic options, now there seems to be no other option than branch closures.
The Gelsenkirchen, Krefeld, Frankfurt-Nordwestzentrum and Kaiserslautern locations are affected by the closure and thus around 420 jobs, said Germany boss Christiane Wiggers-Voellm in a letter to the employees on Tuesday. The textile discounter regrets the decision, but layoffs are necessary in order to carry out the planned adjustment measures and to make the presence in Germany sustainable for the future.
Although the German business, according to the annual report also published on Tuesday, for the first Half of the financial year 2022/23 “first half of the financial year 2022/23” “strong recoveries”, Primark plans to further downsize its store network.
Overall, it is the sixth store closure in Germany for Primark this year. It was already announced in March of last year that the Weiterstadt and Berlin Schlossstrasse locations would not be continued after the leases expired. In addition, Primark is testing a reduction in store space at the Hanover location. Primark is thus closing a fifth of its stores in Germany and will only operate 26 stores in Germany after the closures.
Profitability of German stores unacceptable
The reduction in Primark’s branch network is not entirely surprising. As early as November, the textile retailer announced that it would downsize or close branches in Germany. The situation in Germany is a challenging one, Primark admits, pointing to a market environment that has changed over the years, but also to the above-average branches in this country. The profitability of the locations in Germany has fallen to an unacceptable level due to the falling area productivity and Primark is overrepresented in some regions of Germany, according to the communication.
In order to increase profitability again from now on, not only store closures are planned, but also the optimization of the existing areas. New, smaller branch concepts are to be tested and focus more on the local needs of customers, and new locations in places where “cannibalization with existing stores is low” are also being considered.
The store portfolio in Germany is also to be reviewed in the coming months. In those shops in which the sales areas are being optimized or whose size remains unchanged, no redundancies are currently planned.