Following today’s release of Primark’s pre-close figures for the 24 weeks to 4 March 2023; Louise Deglise-Favre, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Primark is on track to achieve sales growth of 16% for H1 FY2022/23 to 4 March 2023, following a rise of 17.7% for the 16 weeks to 7 January, showing that the retailer has not yet experienced much of a slowdown in demand in 2023. Despite higher average selling prices, after the price increases it implemented in September 2022, Primark still saw a rise in volumes, as it still remains one of the most affordable retailers on the high street and therefore resonates with consumers who are looking to save on apparel purchases due to higher living costs. However, it remains cautious in its full year guidance, expecting sales to slowdown in the second half, and it does not expect to see much improvement in its profit margin, which dropped to c8% in H1 from 11.7% last year, due to higher production and energy costs, as well as weak exchange rates.
“Primark’s home market of the UK performed strongly, with sales rising 15% on the year, as it appealed to consumers looking to trade down from their usual mass-market brands. In Europe, it registered an 18% sales increase, though this was mainly driven by store expansion, with a 6% increase in selling space, including its first openings in Romania and Southern Italy. Europe’s like-for-like sales only grew 8%, likely due to struggling to compete with other local value players like Kiabi in France and New Yorker in Germany due to the retailer’s minimal advertising, limiting the brand in capturing new consumers. In the US, performance remained more muted than in the UK and Europe at 12% despite three new store openings, as it was against strong comparatives and the retailer faces stiff competition from other value players such as Walmart and Target.
“While Primark will continue to roll out its improved website format to other markets such as Germany, Spain, France and the US in the coming months, consumers will most likely be disappointed that it still will not be transactional. The retailer has yet to confirm on whether it will expand its click & collect trial, which it launched for childrenswear products in selected UK stores in late 2022, raising questions as to its success, and its reluctance to commit to online retail will restrict its ability to gain significant market share in the future.”
