Primark, the popular fashion retail chain, is experiencing a strong resurgence in the UK and the US, but its expansion in Germany is presenting challenges. The owner of Primark, Associated British Foods (ABF), recently released its full-year results, revealing a notable increase in sales, margin, and profits as consumer behavior returns to pre-pandemic levels. ABF’s group revenue surged by 22% to £17 billion, and adjusted operating profit rose by 42% to £1.435 billion. Primark’s total adjusted sales also saw a significant boost of 43% to £7.7 billion, with adjusted operating profit reaching £756 million, a 136% increase.

The growth of Primark can be attributed to new store openings and a recovery in customer footfall and sales densities. Though full-year like-for-like sales were still 10% lower than pre-Covid levels three years ago, they outperformed last year’s figures by 1%. This indicates a normalization of shopping behavior, with UK like-for-like sales and market share now back on track to pre-pandemic levels. Primark’s trading in the UK was particularly strong, with total adjusted sales up by 48% and like-for-like sales rising by 13% in the last quarter. In the Republic of Ireland, total sales reached 48% of the previous year’s levels, while in continental Europe, they were 42% higher, with like-for-like sales up by 5%.

Despite these positive developments, Primark is facing difficulties in certain markets such as France, the Iberian market, and Germany. Consumer confidence in Europe remains weaker, and market data indicates that the total apparel market is still below pre-Covid levels in some countries. Primark specifically is grappling with challenges in Germany and is considering repositioning itself to enhance sales densities and ensure sustainable profitability. This involves assessing each store location individually, as sales densities have been declining and have yet to recover post-pandemic.

Nevertheless, Primark is actively investing in its digital capabilities. It recently launched a new website in the UK and is conducting a click & collect trial in 25 UK stores. The company anticipates significant progress in Primark’s digital development with the rollout of an enhanced website across all its markets. Additionally, Primark plans to expand its retail selling space by 1 million square feet in the upcoming financial year, with a specific focus on growth in the US. Its US business had a robust performance, with total sales 11% higher than the previous year and like-for-like sales up by 3% compared to pre-Covid levels.

Primark has observed shifting shopping trends influenced by factors like weather and customer preferences. The exceedingly hot summer negatively impacted Primark’s trade, but with the arrival of colder weather, many markets have experienced improvements. Retail park stores continue to perform well, and major high streets are seeing the return of customers. Sales densities in destination cities have also improved, thanks to the resurgence of commuter traffic and summer tourism. Nightwear and loungewear have been particularly popular, especially core essentials like novelty prints, cozy textures (such as fluffy pajamas and thermals), and standout best-sellers like velvet plush leggings and the ‘Snuddie’.

Additionally, Primark has witnessed strong demand for exclusive collaborations. Collaborations with Kem Cetinay and Stacey Solomon, which reflect a return to a smart-casual menswear look and a successful kids’ collection respectively, have been well-received. The collaboration with Greggs has also generated excitement surrounding the Primark brand, leading to the launch of a third range of clothing and gifting for the Christmas season. In the Iberian market, Primark’s collaboration with Paula Echevarria has seen substantial customer demand.

Overall, Primark’s full-year results demonstrate a significant recovery and growth, particularly in the UK and the US. However, challenges persist in certain European markets, including Germany. Primark continues to adapt to evolving consumer behavior, invest in digital capabilities, and expand its physical retail footprint. With its strong brand presence and focus on customer preferences, Primark is well-positioned to navigate the ever-changing fashion retail landscape successfully.

Useful links:
Primark Official Website
Statista: Market Research on Fashion Retail