Primark, owned by Associated British Foods (ABF), is showing signs of recovery from the impact of the Covid-19 pandemic. Despite facing widespread store closures in the UK and Europe, ABF’s retail division revenue for the first quarter of its 2022 financial year was £2.672 million, which represents a 32% year-on-year increase. While this is promising, total sales during this period were still 5% lower than two years ago, and like-for-like sales were down by 11%.

However, Primark remains a popular choice among consumers, particularly in retail parks and town centres where footfall continues to outperform destination city centre stores. Like-for-like sales in retail parks have even exceeded pre-Covid levels. In the UK, sales were ahead of last year but still 10% lower than two years ago, and trading has been impacted by a decline in footfall due to the rapid rise in Omicron cases. Sales in Continental Europe were also strong compared to last year, but like-for-like sales were 14% behind two years ago, mainly due to Omicron-related factors. The expansion of retail selling space has helped to soften the impact, with total sales only 2% lower than two years ago, although store closures in Austria and The Netherlands resulted in an estimated sales loss of £30 million.

The standout performer for Primark was its US business, which achieved 4% like-for-like sales growth compared to pre-Covid levels and a staggering 37% growth in total sales from two years ago. These positive sales figures are expected to boost profitability, as the operating profit margin in the period was higher than anticipated, projected to be over 10% at the half-year mark. Improved sales densities, mitigation of inflationary pressure, reduced store operating costs, and lower overheads have contributed to this recovery in profitability.

While supply chain disruptions have alleviated somewhat, Primark is still experiencing some delays in dispatch at ports of origin. It expects longer shipping times to persist for a while. To enhance efficiency, Primark is proposing to simplify its in-store UK retail management structure. The rollout of the Oracle stock management system across all stores is progressing well and is expected to be completed by the end of 2022. Additionally, Primark plans to launch a new and improved customer-facing website in the UK by the end of March, with a global rollout expected by autumn. The website will provide customers with product availability by store, although it will not offer online purchasing options.

Despite the challenges posed by the pandemic, Primark remains focused on physical stores and has opened 25 new stores in the past two years, increasing its retail selling space by 7%. In the current financial year, it aims to add approximately 0.5 million sq ft of selling space. The company is actively pursuing new store signings, with a particular focus on key markets such as the US, France, Italy, and Iberia. Primark’s recent lease signing in Romania marks its entry into the country and brings its total reach to 16 markets.

Overall, Primark’s recovery is encouraging in the face of ongoing challenges presented by the pandemic. With its popularity among consumers and expansion plans, the fashion retail chain is well-positioned for continued growth and success in the post-pandemic retail landscape.

Useful links:
1. Primark Official Website
2. BBC News Article on Primark’s Recovery