Primark posts sales rise but warns on currency exchange impact in next financial year
Associated British Foods said sales at Primark were 13% ahead in the first 40 weeks of its financial year at constant currency as trade was driven by an 8% increase in selling space and very high sales densities in stores opened in the last year.
As a result of the weakening of the euro against sterling, total sales were 9% ahead of the same period last year at actual exchange rates.
The group said the fashion retailer’s like-for-like sales over the last 16 weeks were in line with last year's “very strong” comparatives and continue to be held back by the impact that opening new stores in the Netherlands and Germany has had on existing stores in the region.
Meanwhile, Spain, Portugal and Ireland all performed well and the UK continued to deliver a positive like-for-like sales performance. ABF said stores in France, which are excluded from the like-for-like measure, have also continued to trade “very strongly”.
Primark has increased its retail selling space by 0.6 million square feet since the beginning of the financial year and at 20 June 2015 operated 287 stores with 10.8 million square feet of retail selling space.
Since the half year, Primark has opened three new stores in Kaiserslauten and Braunschweig in Germany and Hasselt in Belgium. In addition, it closed one store on The Headrow in Leeds, following the success of the 81,000 square feet store opened in the nearby Trinity shopping centre in December 2013. It also shuttered two very small stores in Margate and in Naas in the Republic of Ireland.
The net selling space added in the last 16 weeks was less than the same period last year which accounts for the reduction in selling space growth from 11% in the first half to 8% for the year to date.
As previously announced, Primark expects to add a further 0.3 million square feet of selling space by the end of the financial year. It said preparations are well advanced for the opening of its first US store in September at Downtown Crossing in Boston. In addition, European expansion will continue with the opening of up to three stores in Italy, the first of which is planned to open in early summer 2016 in a new shopping centre in Arese, northwest of Milan.
Across the wider ABF business, group revenue for the 40 weeks ended 20 June 2015 was 2% ahead of the same period last year at constant currency, and was level at actual exchange rates.
As Primark sources much of its merchandise in dollars, it said the US dollar's strength, particularly against the Euro, will have an adverse effect on margins in the new financial year although much of the impact has been mitigated by the retailer’s buying teams as they firm up orders for next year.
Looking ahead, ABF said: “As previously indicated, the impact of currency on results for the next financial year will be more significant than this year and arises from transactional currency exposures, primarily in British Sugar and Primark.”
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