The textile chain Primark will not undertake further price increases beyond those already planned during its current fiscal year, which began in mid-September, according to the firm’s parent company, Associated British Foods (AB Foods), which will launch a £500 million (572 million euros) share buyback plan.
In its last fiscal year, which ended last September 17, Primark posted an adjusted operating profit of 756 million pounds (865 million euros), representing an increase of 136 percent over the result posted in the previous year, while turnover increased by 38 percent to 7,697 million pounds (8,812 million euros).
However, despite the increase in revenue, the chain said its comparable sales, which exclude the effect of exchange rates and changes in the company’s accounting perimeter, were still 10 percent lower than pre-Covid-19 levels three years ago, although 1 percent higher than last year.
In the United Kingdom, Primark’s sales grew 48 percent for the year, with a 13 percent increase during the last quarter of the fiscal year. On a like-for-like basis, sales were in line with last year and, compared to pre-Covid-19 levels, comparable sales improved from a 10 percent decline in the first quarter to a 2 percent drop in the last quarter.
In continental Europe, total sales were 42 percent higher than a year earlier, although consumer confidence was generally weaker and contributed to a 16 percent comparable decline from pre-COVID-19 turnover.
In the Iberia region, sales densities were much improved over last year when COVID-19 restrictions curtailed domestic demand and resulted in low levels of tourism, although Primark noted that the improvement «was held back by extreme temperatures during the summer months that kept many customers at home.»
In addition, the ABF group took a negative impact on its accounts of 206 million pounds (236 million euros) related to the write-down of the value of its business in Germany due to the fall in the profitability of its stores, warning that it is studying options to return the long-term profitability of that business, including «optimizing» the retail space per store, as well as reviewing the overall portfolio of stores in the country.
As for the U.S., Primark lifted its annual sales by 11 percent, allowing comparable sales to be 3 percent above pre-COVID-19 levels three years ago. The chain also expects to «nearly double» retail space in this market over the next year.
At the end of its fiscal year, Primark had a portfolio of 408 stores, including 56 in Spain, which it expects to grow to 530 by 2026 with the planned opening of 27 new stores during the 2022/23 fiscal year.
Separately, AB Foods reported that for its fiscal year as a whole it achieved an attributable net profit of £700 million (€801 million), a 46.4 percent improvement on the previous year, with revenue up 22 percent to £16.997 billion (€19.45 billion).
«The Group continues to face considerable headwinds from high inflation, particularly in energy costs, volatile exchange rates and pressure on consumer discretionary spending,» said Michael McLintock, chairman of AB Foods, who noted that the food business will continue to try to offset rising input costs through price rises and efficiency improvements.
PRIMARK WILL NOT UNDERTAKE FURTHER INCREASES.
However, the multinational’s CEO, George Weston, announced that Primark will maintain prices for the new year at the levels already implemented and planned.
In doing so, he expressed his confidence that Primark’s sales growth will be driven by the price increases implemented for autumn/winter this year and those already planned for spring/summer next year, as well as by the increase in retail space.
«Given a backdrop of likely reduction in consumer disposable incomes, this year we have decided not to implement further price increases in the fall/winter and spring/summer ranges beyond those already implemented and planned,» Weston said in a statement.
As such, he expects Primark’s adjusted operating profit margin for the next financial year to be below 8 percent, although he indicated that, going forward, the firm remains focused on returning to an adjusted operating profit margin of around 10 percent as commodity prices moderate and consumer confidence improves.
