Primark sales boosted by European performance

15/01/2015
Cut-price fashion chain’s sales were up 15% over Christmas, helping to offset difficult time at parent firm ABF’s sugar business
Primark took market share and enjoyed underlying sales growth in the UK and Ireland over Christmas after it held its nerve and avoided joining in with Black Friday discounting.

Sales at the low-price fashion chain powered ahead 15% in the 16 weeks to 3 January as its Spanish and Portuguese stores also saw strong rises in underlying sales while the company opened new stores in the Netherlands and Germany after expanding into France.
John Bason, finance director of Primark’s parent company Associated British Foods, said sales had been “sensational” in France and the company had now signed leases on eight stores in the US as it gears up to cross the Atlantic at the end of this year.
The strong performance by Primark helped to offset a difficult time at ABF’s sugar business, which is suffering from falling prices. Analysts trimmed annual profits forecasts by between 2% and 3% as ABF said it expected a “marginal decline” in profits for the group as a whole this year as a “large reduction” in profits at its sugar business was offset by growth at Primark and its grocery, ingredients and agriculture divisions. The company also admitted it would book a loss of £128m for the closure of two unprofitable sugar factories in China.
ABF reported a 3% rise in group revenues for the last quarter at constant currency rates (1% at actual exchange rates). “With the fall in EU sugar prices and weakness in the world sugar price, we expect a further large reduction in profit from AB Sugar, but this will put much of the effect of the structural changes in EU prices, seen over the last three years, behind us.”
In the UK, Bason said Primark had benefited from holding its nerve while many rival fashion chains brought out the discount banners during the warm autumn weather and enthusiasm for the US-inspired promotional day Black Friday.
“We did nothing for Black Friday, no special events, but we saw increased footfall on the high street and not surprisingly we gained from that,” he said.
“I think it’s the right thing to hold off on discounting,” he said. “Once the weather turned, shoppers came into stores. In fashion retail, weather affects sales and so we didn’t want to discount. We are confident in the Primark proposition and long-term growth; we don’t kneejerk around short-term weather effects.”
While profit margins slipped compared with the previous year, Bason said this was because of “exceptional trading” in 2013, when the company sold out of stock.
In 2014, Bason said the company had sold out of Christmas jumpers, selling more than 1m, while kidswear, and even womenswear, linked to the hit Disney film Frozen had also sold well. While sales in October and November were affected by the balmy autumn in the UK, Bason said it only affected seasonal products such as coats and knitwear, which only make up a third of Primark’s product range so overall sales continued to rise.
Primark opened four stores in the Netherlands and three in Germany, including a big outlet in Dresden, during the quarter. The retailer’s rapid expansion in recent years has given it 287 stores in nine countries, with 10.7m sq ft of selling space. It plans to add 1m sq ft of shop space this year via new stores or extensions in Germany, Belgium, the UK and US.
The head of Primark’s successful Spanish operation has been put in charge of its venture into the US, where it expects to open three stores before Christmas. Last spring, Primark set out its plans to enter the US, starting with north-eastern states such as New York and New Jersey, with around 10 stores planned for the metropolitan corridor that runs from Boston to Baltimore. It struck a surprise deal to take over unwanted space in shopping malls from Sears.

Fonte:http://www.theguardian.com/business/2015/jan/15/primark-sales-rise-christmas-new-stores

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