Associated British Foods announced its interim results on Tuesday covering the 24 weeks to the beginning of March, and they showed that the company’s Primark chain is continuing to prosper while its baby steps into digital are paying off.
Revenue at the business rose 6% to £4.5 billion, a 7.5% rise at constant currency. Operating profit was up 45% at £508 million with the operating profit margin rising to 11.3% from 8.3%.
ABF said Primark delivered strong sales growth in the period, “driven by newly-opened stores and by last year’s carefully selected price increases to offset inflation”.
New stores contributed 5.4% of sales growth, due to both increased selling space and higher sales densities. Like-for-like sales growth was 2.1% in the period — which isn’t spectacular but is nonetheless respectable given the conditions in recent months for the retail sector. That hike was driven by higher average selling prices, partially offset by slightly smaller basket sizes and lower volumes.
Sales of womenswear and menswear both grew well, as did sales of health & beauty. And its digital engagement continued to support sales growth in the period.
In fact, after its tentative steps into digital, its “growth strategy continues to progress. Traffic to our websites increased in all markets in the period, with record traffic levels over Christmas. In most markets, some 20% of visitors now use the stock checker facility. We continue to invest in search engine optimisation, CRM and paid marketing”.
It has completed its latest Click & Collect trial in the UK with its result being “good basket sizes and strong additional attachment store sales”. It said the service is “satisfying unfulfilled demand from both new and existing customers by offering them extended choice. We believe we have developed a bespoke version of e-commerce that is additive to our store-led model and delivers incremental sales. The results give us confidence to roll out this service across all our stores in England, Wales and Scotland, with a curated product range” across multiple categories.
Deep dive into the figures
Moving back to its wider results, it said the constant currency sales growth figure for the entire six months was slightly slower than the first 16 weeks of the period with the company having previously said that sales grew 7.9% in the 16 weeks to early January.
That was despite trading in the earlier period being marked by a slow start for cold weather categories due to surprisingly warm weather. But it was followed by strong Christmas trading with its seasonal ranges selling-through well.
As mentioned, both womenswear and menswear were strong, particularly in performance-wear, leisure, and knitwear as well as its Rita Ora collection.
In the eight weeks to 2 March, sales increased by 6.3%. Trading was softer in terms of volumes and due to prolonged colder weather, average selling prices were higher than expected in the period across cold-weather products with generally good sell-through of stock. Cold and wet weather slowed sales of luggage, beach and swimwear.
Footfall was in line with the same period last year and it saw “notably strong trading at our destination city centre stores, particularly where located in tourist destinations”. That’s good news given that these destinations had struggled immediately after the pandemic with many consumers still working from home and local and international tourists staying away from what were once hugely popular shopping destinations.
UK and Europe strength
In the UK, sales grew by 4.3% year on year, driven by like-for-like sales growth of 3.6% and a contribution from new space of 0.7%. Trading was marked by warm weather early in the period, good sales of seasonal ranges at Christmas and soft trading in January and February due to wet weather and commuter transport disruption.
Again, its city centre stores “performed well with the continued return of tourists and office workers particularly benefitting our stores in Oxford Street, Edinburgh and Birmingham”.
The chain’s market share continued to grow, increasing from 6.7% to 6.9% in the 24 weeks to the end of the period, according to Kantar figures.
In Europe (excluding the UK), sales grew by 7.9%. New selling space contributed 6.4%, with like-for-like sales up 1.5%. The company said like-for-likes were impacted by the fast pace of store expansion, particularly in France and Italy.
But trading in France was “very good, with footfall driving significant growth in total sales, supported by good like-for-like sales growth, strong performance from our new stores and overall outperforming the market”.
It also outperformed in Spain, “with strong sales growth in our stores located in regions benefitting from tourism, albeit partially offset by adverse weather conditions”.
In Italy, sales were well ahead with a very strong performance in new stores, while trading in the Netherlands was “strong, with good like-for-like sales driven by operational improvements”.
But in the Republic of Ireland and Portugal, it had “only satisfactory trading with warm weather holding back pre-Christmas sales and slower recovery in consumer sentiment”.
Germany, which has been a les buoyant market, seems to be getting back on track following actions taken by the company. Underlying trading “was strong with total sales lower as a consequence of our reduced selling space but like-for-like sales increased despite industry-wide strike action. The restructuring in Germany is now largely complete and has resulted in improved sales densities and profitability. We also launched our first ever multi-media brand campaign in the country”.
US powers ahead
And the US? That market has been a problem for some retailers but not for Primark.
Sales growth was 38.4%, “driven by new store openings which performed well” and adjusted operating profit improved “significantly” in the period. It opened three new stores: Woodfield Mall in Chicago, Smith Haven Long Island, and Charlotte North Carolina.
And it opened a new distribution centre in Jacksonville, Florida, to serve its expansion in southern states, at the same time announcing lease agreements for stores in Tennessee, Maryland and Texas.
