Primark profits soar driven by sales increase in all markets

In a trading update by parent company Associated British Food (ABF), Primark posted operating profits of £717m, up 30% as compared to the £550m in profits reported last year.

Total sales increased 17% to £9bn, as compared to the £7.6bn in sales reported during the same time last year.

In the UK, sales increased 11% while market share in the country grew to 6.7% from 6.4% last year driven ”in particular by our new customer website that has now been running for more than a year.”

Sales were up 18% in Europe while net sales in the US increased 24% as compared to the same time last year.

Primark said it expects to increase its selling space by 1 million sq ft as it continues to invest in existing store estates, new stores and digital infrastructure to drive sales growth in the next year.

Looking ahead ABF said: ”We expect further growth in sales next year driven by new selling space expansion of some 1 million sq ft and modest levels of like-for-like sales growth. This like-for-like growth will be underpinned by our value proposition, our product relevance and stretch, our increasingly effective digital platform and some limited pricing.

”Lower material costs and lower freight costs should result in a substantial recovery in gross margin and overall we expect Primark adjusted operating profit margin to recover strongly. At this early stage, we believe that the adjusted operating profit margin will be above 10% with further improvement dependent on levels of consumer demand.”

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.

”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.”