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Primark: Cautious on 2023 Despite ‘Strong Christmas Period’

Primark sales have been “good in all our markets and was ahead of expectation,” parent company Associated British Foods (ABF) said on Tuesday, adding that the value retailer “had a very strong Christmas period.”

U.K. has seen inflation surge in 2022. According to the latest data from the country’s Office for National Statistics, the pace of inflation dipped to 10.5 percent in December, down from November’s 10.7 percent. ABF is trying to support customers by keeping prices the same instead of charging more.

Though business in 2023 is off to a good start, “macro-economic headwinds remain and may weight on consumer spending in the months ahead,” ABF said. Despite those concerns, the company will speed up store openings and add a net 1 million square feet of retail selling space for the current fiscal year ending in mid-September.

British Retail Consortium CEO Helen Dickinson warned earlier this month of retail’s challenges this year. “Cost pressures show little immediate signs of waning, and consumer spending will be further constrained by increasing living costs. Retailers are juggling big cost increases while trying to keep prices as low as possible for their customers,” she said.

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Retailers are also concerned that cash-strapped consumers appear to be shifting some of their spending from goods to services.

Sales at Primark year-to-date jumped 18 percent to 3.15 billion pounds ($3.88 billion) from 2.67 billion pounds ($3.29 billion). Margins were lower than a year ago due to inflation costs for new merchandise driven by the strengthening of the U.S. dollar against the pound sterling and the euro, as well as freight rates and labor and energy costs.

Foot traffic was strong in both the U.K. and the Eurozone. Comparable sales were up 11 percent on higher unit volumes, higher average selling prices and fewer markdowns. Sales in the week leading up to Christmas Day “reached a new record.” A click-and-collect trial of children’s products in 25 stores is off to a good start, ABF said.

Week-on-week footfall across U.K. retail destinations through 12 p.m. Christmas Eve was up 9 percent, U.K. data firm Springboard said. Retail parks saw footfall surge 26.4 percent in the same period, with shopping centers benefiting from a 7.4 percent gain. Footfall in city centers and Central London were down because of rail strikes in the period.

By geography, U.K. sales were up 15 percent versus year-ago levels. ABF said Primark’s share of the total U.K. clothing, footwear and accessories market by value, which includes online sales, for the 12 weeks ended Dec. 11, 2022 gained 7 percent, on top of the 6.5 percent increase last year. Sales are now “very close” to trading when stores reopened in June 2021 following prolonged lockdowns.

In Europe, excluding the U.K., sales rose 16 percent in all markets, with like-for-like sales up 8 percent. In addition, 10 stores opened in the current fiscal year thus far, with Bucharest, Romania and Caserta, near Naples in Italy, among the doors that performed well.

Sales in the U.S. were up 4 percent, on top of strong comps when Covid stimulus drove spending. “We plan to nearly double selling space in the US in this financial year and opened three stores towards the end of the period—Roosevelt Field, Long Island; Jamaica Avenue, Queens; City Point, Brooklyn—and all are performing well,” ABF said.

Primark last year upgraded its U.K. website and traffic on the site rose 85 percent, with double the average pages viewed per session. The new site recently launched in Ireland, and will be followed in the months ahead with site updates in Germany, Spain and the U.S. Updates to other geographic regions are expected by the middle of the calendar year, ABF said.

Retail selling space increased from 17.0 million square feet to 17.7 million square feet year-on-year, and ABF said all new stores are performing well. As of Jan. 7, 2023, the company operated 416 doors. Among the ten new stores that opened, the store in Romania represented Primark’s 15th market. Other markets that saw new doors include the U.S., Italy, Poland, France and Northern Ireland. ABF said it also has reopened its Bank Buildings location in Belfast, which suffered a “devastating fire in 2018.” In turn, the company also closed its temporary Belfast store in Donegal Place.

For the rest of the fiscal year, Primark will open an additional 17 new stores, including “seven in the U.S., three in France, three in Spain, two in Italy, one in Romania, and our first store in Slovakia, which becomes Primark’s 16th market, in Bratislava,” ABF said. The company also just signed a lease for its first store in Budapest, for Primark’s 17th market.