Primark has seen like-for-like sales fall by 12% in its latest full-year results, as ongoing store closures and trading restrictions “inevitably” led to a “significant” loss of sales and profit in the period.
While its parent group, Associated British Foods (ABF), said there was “no doubt” that Primark was “seen to be vulnerable to the pandemic”, its operating profit rose by 15% to £415m the year ended 18 September 2021, as ABF confirmed plans for its expansion across international markets.
All Primark stores have now reopened and are trading with only limited restrictions in some countries, with ABF noting customers have returned to stores in large numbers. It added that there was “strong supporting evidence” that its in-store shopping experience will have “enduring appeal” for customers post-pandemic.
While a post-pandemic equilibrium is yet to be reached however, according to the group, like-for-like sales compared to pre-Covid levels are reportedly improving steadily as “customers’ appetite to return to shopping and city centres increases and, over the medium-term, as foreign and domestic tourism recovers”.
Looking ahead, ABF now expects Primark to increase sales “significantly” next year, with sales to increase by at least the estimated £2bn of sales lost due to store closures last financial year.
It also predicts a “sharp improvement” in adjusted operating margin, recovering to above 10%, provided there are no further restrictions on store trading.
Primark is now eyeing a new global expansion plan, with plans to increase its presence in the US, France, Italy and Iberia. It will also continue to expand its selling space next year, with the most stores being added in two key markets, Italy and Spain.
As part of its future growth plans, Primark is also investing to upgrade its digital presence and online visibility and is on track to launch a redesigned customer facing website in the UK in the first quarter of 2022.
Nonetheless, ABF warned that Primark is “not immune” to the challenges of supply chain, raw material cost and labour rate inflation. However, it expects this impact to be “broadly mitigated” by a currency gain due to the weaker US dollar, as well as improved store labour efficiency and lower operating costs.
George Weston, CEO of ABF, said: “Our financial performance this year more than ever demonstrates the resilience of the group. This comes from the strength of our brands, the diversity of our products and markets, our geographic spread, conservative financing and an organisation design that permits fast and flexible decision-taking.
“Primark delivered a good performance in the face of continued disruption to trading caused by the pandemic. It also unveiled its wide-reaching sustainability strategy with the aim of making more sustainable fashion affordable for all. Although the possibility of further trading restrictions cannot be ruled out, we expect Primark to deliver a much improved margin and profit next year.”
He added: “We are now intent on expanding our new store pipeline and investing in technology and digital capabilities to continue improving the performance of the business.
“Given the strength of our balance sheet and our confidence in the future we are setting out today a new capital cash allocation policy that provides the group with the capital it needs both for investment and financial stability while allowing for enhanced returns to shareholders when appropriate.”