Primark powers ahead in H1, increases market share, SS23 starts strongly

Primark powers ahead in H1, increases market share, SS23 starts strongly

PrimarkAssociated British Foods


ABF said it now expects “an improvement to our previous expectations of adjusted operating profit in the second half as a result of higher sales and some lower operating costs”.

That piece of good news came as trading for the first six months of its financial year “has been good in all its markets, well ahead of expectations, and represents a material improvement in both the UK and Europe” compared to the second half of the last year. 

It added that the “early reaction to our spring and summer ranges has been very positive”.

So what are the numbers? The company will deliver the full results for H1 in April, but for now, it expects total sales to be 16% ahead on the year, and like-for-like sales to be 10% ahead as a result of higher unit volumes and higher average selling prices. 

Footfall has increased “strongly” in both the UK and in Europe. That’s unsurprising given that last year, sales had been disrupted by the consumer reaction to Omicron from December, which meant lower footfall overall, as well as some store closures in the Netherlands and Austria. Covid-linked public health measures had stayed in place in a number of European countries into the spring.

The latest performance was helped by a “more meaningful” rise in weighted average retail selling space (+3%) and follows the acceleration of Primark’s store opening programme. 

The company is clearly picking strong locations and said “all the new stores opened in the period are performing well and have high sales densities”. It expects retail selling space to be 17.8 million sq ft at the half year, up from 17 million sq ft a year ago.

The strong trading means the adjusted operating profit margin should be above 8%. But that would be lower than the 11.7% of a year earlier due to “the increase in the cost of bought-in goods, driven by the significant strengthening of the US dollar against sterling and the euro, higher freight rates, and inflation in labour and energy costs”.



As for trading in individual countries and regions, the UK was particularly strong and sales for the half year should grow by 15% with like-for-like sales up 14%. 

Primark’s share of the total UK clothing, footwear and accessories market by value rose in the 12 weeks to 8 January (up to 6.8% this time from 6.3% a year ago). Given that the total figure for the UK market includes online sales and Primark doesn’t trade online, that’s an impressive achievement.

The company also said footfall is strong in major city centres as well as on high streets and in retail parks. This is particularly good news given that the company has invested heavily in city centre flagship stores and these suffered, not just during the pandemic, but for a long time after lockdowns ended. 

In Europe, total sales should increase by 18%, “driven by higher footfall with growth in all our markets”. Like-for-like sales are expected to be 8% higher. The company had a very extensive store opening programme in this region, giving a 6% year-on-year increase in weighted average retail selling space. New stores in Romania’s Bucharest and in Italy’s Bari and Caserta “opened strongly and have continued to trade particularly well”.

As for the US, sales growth there should be 12%, even though year-on-year comparisons were particularly tough given that consumer spending had previously been supported by Covid-related government stimulus. Three new stores opened in the period and it’s on track to nearly double the number of US stores in this financial year.

Although the company has predicted an improvement in operating profit for H2, it doesn’t believe it will be plain sailing in the last six months of the financial year. 

It’s staying cautious about the resilience of consumer discretionary spending due to inflation and rising interest rates. And its expectation is for H2 like-for-like sales growth to lag H1, but “based on our experience to date, will be better than our previous expectation”. Sales densities should improve year-on-year. 

Costs will be less of a headwind in some respects as “sea freight costs have returned to more normal levels and energy costs are much reduced recently”. However, the cost of bought-in goods will be higher due to the strength of the US dollar and higher wage costs. 

The company added that the rollout of its improved website continues. Already operational in the UK and the Republic

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