Wednesday 26 October 2016

Primark blames the weather for weaker sales in December

Published 15/01/2016 | 02:30

A model shows off some of Primark’s fashion product
A model shows off some of Primark’s fashion product
Shoppers queue to get into one of Primark’s latest stores, in central Madrid. Photo: Antonio Heredia/Bloomberg

Warm, wet weather dented the performance of discount-clothing chain Primark in the run-up to Christmas.

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Its owner, Associated British Foods (ABF), said sales at the retailer rose 7pc in the 16 weeks to January 2, but that its performance was also affected by currency headwinds.

It added that the like-for-like sales performance of the chain in the first seven weeks of ABF's financial year, which began in mid-September, was "strong", benefiting from a weaker performance in the corresponding period the previous year when the autumn was warm.

But in the nine weeks leading up to Christmas, and over the festive season itself, like-for-like sales were weaker.

ABF finance director John Bason insisted that the weaker pre-Christmas performance was nothing to worry about.

"Footfall was fine," he said. "It's specific to those weather- related items. We'll move on from that."

As it had expected, Primark's operating profit margin in the latest period was lower than last year as a result of the stronger US dollar.

But the margin decline was lower than had been anticipated.

Primark, which has its headquarters in Dublin and which trades as Penneys in Ireland, accounted for £5.3bn (€7bn) of ABF's total £12.8bn revenue in its last financial year and for £673m of its nearly £1.1bn group adjusted operating profit.

ABF's activities include sugar production, agricultural and grocery products.

It owns a range of well-known household brands, including Patak's, Ryvita, Jordans, Ovaltine and Blue Dragon.

The company said that Twinings Ovaltine achieved strong sales growth in Australia and an improvement in Thailand. It added that trading at George Weston foods in Australia was also "much improved".

There are currently 299 Primark stores, 166 of them in the UK, and ABF has expanded the chain across Europe over the past decade, opening in countries including Germany, France, Spain and the Netherlands.

It will open its first-ever store in Italy, in Milan, early next summer.

Last September, Primark also opened its first store in the United States, in Boston. It has since opened its second, an 80,000sq.ft premises, at the King of Prussia Mall in Pennsylvania.

"We expect to open a further six stores in the US later this calendar year," said ABF.

"In addition, in calendar 2017, we now expect to open a 70,000sq.ft store in the American Dream shopping mall in New Jersey."

For its current financial year, ABF stuck with its forecast for a modest decline in adjusted operating profit, brought about by currency pressures.

The group also reiterated expectations for an improvement in sugar profits in 2017. (Additional reporting Reuters)

Irish Independent

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