Primark, the popular retail brand known for its stores-only approach, is thriving as footfall in city centers rebounds. Its parent company, Associated British Foods (ABF), released a positive trading update highlighting the brand’s strong performance across all markets. Total sales, currency-neutral sales, and like-for-likes all experienced double-digit growth, and footfall in city centers has recovered.

The Christmas period was particularly successful for Primark, indicating that its offerings resonate with both new and existing customers. However, the company acknowledges the potential impact of macro-economic headwinds on consumer spending in the upcoming months.

Despite these challenges, Primark remains confident in its growth prospects. The brand is currently in the midst of an accelerated store opening program, aiming to add 1 million square feet of retail selling space this financial year. Since Primark does not operate an online store, it can effectively cater to demand in areas where it currently lacks a physical presence.

A closer look at the latest quarter reveals strong footfall in both the UK and the eurozone, with unit volumes increasing over the 16-week period ending January 7. Sales were up 18% at actual exchange rates and 15% currency-neutral. The recovery in footfall is a significant achievement, especially considering the impact of the Omicron variant during the previous year.

Primark emphasizes the strength of footfall in major city centers, high streets, and retail parks in the UK. This resurgence in physical retail has played a pivotal role in driving Primark’s success, proving skeptics wrong who criticized the brand for not embracing e-commerce.

In the UK, Primark experienced a 15% increase in sales, primarily driven by like-for-like growth. The brand’s share of the total UK clothing, footwear, and accessories market has also risen to 7%, up from 6.5%.

In Europe, Primark’s performance is described as “very encouraging,” with sales up 16% and growth observed across all markets. The brand has focused on expanding its presence in Europe, opening 12 stores in the past year. Particularly, its stores in Romania and Italy are performing well.

Despite a strong previous year in the US due to government stimulus programs, Primark still achieved 4% growth in the latest period. The brand intends to expand its selling space in the US and has successfully opened three new stores that are performing above expectations. Moreover, Primark is planning to open more stores in various markets, including France, Spain, Italy, and Romania.

Although Primark currently does not offer online sales, it continues to enhance its digital capabilities. The UK website experienced an 85% increase in traffic and a higher average number of pages viewed per session. Furthermore, the brand has launched a click & collect trial for children’s products in 25 UK stores and intends to expand its digital presence to other markets, including Germany, Spain, and the US.

In terms of profits, Primark reported that its adjusted operating profit margin surpassed expectations. However, inflation in the cost of goods, along with higher freight rates, labor costs, and energy costs, resulted in a margin slightly lower than the previous year.

Overall, ABF maintains its expectations of significant sales growth but predicts a lower adjusted operating profit compared to the previous financial year. Primark’s success underscores the value of its stores-only approach, especially as physical retail experiences a resurgence in consumer interest.

Useful links:
1. Retail Gazette: Primark shows value of stores-only approach with strong trading update
2. BBC News: Primark’s performance boosts ABF sales