Primark revenue and profit jump thanks to ‘robust’ trading

Parent company Associated British Foods (ABF) said Primark's strong revenue growth reflected a sales increase in all its markets driven by a number of factors, including "carefully selected price increases" taken to partially offset input cost inflation and well-received product ranges attracting new and existing customers.

Good footfall, strongly performing new stores and the rollout of its enhanced customer website also contributed to the sales performance, the retailer added.

In the UK, sales were up 11% against the previous financial year, driven by like-for-like growth of 10%, despite unhelpful weather in the third and fourth quarters which resulted in slightly lower footfall. Primark’s market share increased from 6.4% last year to 6.7% this year.

Operating profit rose 30% to £717m during the 52-week period, compared with £550m in the previous year.

However, adjusted operating profit for the full year dropped 3% to £735m and adjusted operating profit margin stood at 8.2%, down on the previous financial year’s 9.8%.

Primark said this was due to higher costs of bought-in goods, freight rates, labour costs and energy costs as well as the strength of the US dollar against sterling and the euro when it placed orders for spring/summer ranges, which were partially offset by its selective price increases and an improvement in store sales densities due to higher footfall.

The company expects that the adjusted operating profit margin for the current year will be above 10% with further improvement dependent on levels of consumer demand.

Primark opened 27 new stores in the period: eight in the US; six in Central and Eastern Europe with three in Poland, two in Romania and its first store in Slovakia marking its 15th and 16th market; four in Italy and France respectively; three in Spain; and two in the UK.

Meanwhile, the retailer's Christmas campaign has launched in stores today, featuring partywear, festive knitwear and matching pyjamas. The business said it expects "modest" levels of like-for-like sales growth in the next year by adding 1 million sq ft of selling space. It said lower material and freight costs should result in a substantial recovery in gross margin and that Primark's adjusted operating profit will "recover strongly".

George Weston, chief executive of ABF, said: "Trading at Primark was excellent under the circumstances. At the beginning of the year we implemented selective price increases partially to protect profitability, on the grounds that the significant input cost inflation was temporary. That careful pricing delivered as intended, with customers continuing to shop with us enthusiastically.

"Profitability in our food businesses moved ahead as a result of the appeal of our products and the strength of our brands, both of which supported us in the recovery of high levels of input cost inflation without disrupting our customer relationships.

"Although consumer demand remains uncertain, Primark is as well placed as it has ever been. We continue to believe that Primark’s offer is very attractive not just to existing customers but also to new customers engaged by our digital platform, new store openings, and word of mouth which remains as powerful as ever. With Primark margin now moving back to its historic levels, we view the future for this business with confidence."