Primark sales hit by poor weather
Bad weather stymied sales at Dublin-based Primark in the six months to March, but a buoyant UK market has dispelled any concerns for investors in owner Associated British Foods (ABF), as it continues international expansion of retail chain.
ABF said that it plans to open another Primark store in the United States in late 2019, at Sawgrass Mills in Florida. The huge outlet mall is one of the biggest in the US.
ABF said the new store will give Primark an opportunity to trade in "another type of retail environment" in terms of both mall format and geographic location. ABF has concentrated its initial foray into the US in the northeast, in markets such as Boston and New York. Its ninth US outlet will open this year, in Brooklyn.
Like-for-like sales at Primark fell 1.5pc to £3.47bn (€4bn) in the first half of ABF's financial year, while its adjusted operating profit at actual exchange rates was up 6pc at £341m (€395.2m). On a constant currency basis it was 4pc higher. Primark trades as Penneys in Ireland.
"Sales were held back by unseasonably warm weather in October with a significant decline in the like-for-like measure in that month," said ABF. "The last week of the period was also challenging, with freezing temperatures across northern Europe."
But ABF said that UK like-for-like sales in the period rose 8pc as it grabbed a bigger share of the total clothing market there. In the 15 weeks to February 24, Primark also delivered like-for-like growth of 1pc across its network.
ABF also expects Primark's profitability to accelerate in the current half of its financial year due to margin improvements.
"This will be driven by better buying and some benefit of the recent weakness of the US dollar which will more than offset an expected return to a more normal level of markdowns, compared to the very low level achieved last year," it noted.
The company will open 1.2m sq ft of Primark selling space in the current financial year.
ABF, which is controlled by the Weston family that also owns Selfridges, Brown Thomas and Arnotts, has activities that stretch from ownership of grocery brands such as Ovaltine and Ryvita, to sugar production and the sale of agricultural products.
Its total revenue in the first half of its financial year rose 2pc to £7.4bn (€8.6bn) based on actual exchange rates, while its adjusted operating profit slipped 1pc to £648m (€751.1m) on the same basis. At constant currency rates, the figures were 3pc and 1pc higher respectively.
It said a slight strengthening of sterling had resulted in an £11m (€12.7m) hit to the group's operating profits during the first half.