Primark’s status as a stand-out performer on the high street has been reaffirmed after half-year sales at the budget fashion business rose 4 per cent to top £3.6 billion.
The retail giant, which is owned by conglomerate Associated British Foods (ABF), saw adjusted operating profit jump 25 per cent to £426 million in the six months to 2 March as it continues to grow its footprint in the UK and overseas.
While there was a 1.5 per cent dip in like-for-like sales, which strip out the impact of store openings and additional selling space, the group pointed to “much higher” margins, helping to fuel the profit surge.
In the UK, total sales were 2.3 per cent ahead of last year, while like-for-like sales grew by 0.6 per cent. Primark, which recently opened its biggest store to date, in Birmingham, said its share of the UK clothing, footwear and accessories market had “increased substantially”.
Total sales in the eurozone were 5.3 per cent ahead of last year, at constant currency. However, like-for-like sales fell by 3.2 per cent driven by tough trading in the German market and weaker footfall during November across all markets. Particularly strong sales growth was seen in Spain, France, Italy and Belgium.
The firm said it had strengthened its German management team “to address the trading which continues to be difficult”. Preparations are underway to reduce selling space at a “small number” of German stores to “optimise their cost base”, Primark added.
The group’s expanding US operations “continued to perform strongly”, driven by “excellent” trading at its recently opened Brooklyn store combined with like-for-like sales growth.
During the second half of the year, Primark’s buying, merchandising, design, sourcing and quality functions, which are currently located in Reading and Dublin, will be consolidated in Dublin.
The chain expects to add 950,000 square feet of additional selling space in the current financial year, comprising stores in new locations and additional space from relocations.
Spanning 160,000 square feet, the new Birmingham emporium is the biggest of the retailer’s 365 stores across Europe and the United States. The five-floor building features three food venues, including a Disney-themed cafe, a Disney shopping area, beauty studio and Hogwarts Wizarding World section.
The strong Primark performance helped ABF record a 2 per cent rise in turnover to £7.5bn, although pre-tax profit was dragged down by a £79m exceptional charge linked to pensions and its bread-making arm. Pre-tax profit came in 15 per cent lower at £515m in the period.
ABF’s sugar unit also saw profits take a knock as the result of “significantly lower” prices which affected the industry.
Chief executive George Weston said: “This is a robust set of results. Profit at AB Sugar was substantially reduced but, from this period, we expect our sugar profitability to improve. Primark delivered excellent profit growth, driven by further development of our customer experience and selling space expansion.”
The board has declared an interim divi of 12.05p, a year-on-year increase of 3 per cent.