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Retail

Primark Plans Biggest Expansion In Decade As Chain's Sales Soar

The Primark apparel chain is planning its biggest expansion of store space since 2006 as its low prices continue to draw in shoppers without the help of an online offering.

The retailer aims to open 29 stores in the current fiscal year, mainly outside the U.K, owner Associated British Foods Plc said Wednesday as it reported better-than-expected sales and profits.

Its Grocery business, which includes Twinings Ovaltine and Allied Bakeries, reported a 2% increase in revenue at constant exchange rates, and a 4% increase in profits. Its retail business, which includes Primark, posted an 11% increase in revenue at constant exchange rates.

High-Street Staple

Now a staple of Britain’s shopping streets, Primark is taking its budget fashion stores across Europe and into the U.S. The latest expansion plan comes after the business tripled its floorspace to about 13 million square feet (1.2 million square meters) over the last decade. Unlike most clothing retailers, Primark relies entirely on old-fashioned bricks-and-mortar stores and has shunned an e-commerce offering.

“There’s a very viable strategy without trading online,” AB Foods Chief Executive Officer George Weston said by phone. “The best value is to be found on the high street, not online.”

Share Boost

Shares of AB Foods rose as much as 4.8 percent early Wednesday, leading gains in the U.K.’s benchmark FTSE 100 stock index, after the better-than-expected earnings.

The results showed that the company is dealing with pressure on U.K. apparel chains from a fall in the pound since the vote to leave the European Union, which raises the cost of imported clothing, as well as a rise in online shopping and a shift in consumer spending toward experiences. Shares of Primark rival Next Plc have slumped since 2015 and its profit in the 12 months through Jan. 31 fell for the first time in eight years.

AB Foods was bolstered by a 2 percent like-for-like sales increase at Primark stores in the U.K. in the 24 weeks ended March 4, along with gains in the company’s sugar business. Adjusted operating profit in the latter unit rose to 123 million pounds from a restated 3 million pounds a year earlier.

The company said early trading from 16 Primark outlets opened in the first half of the year is ahead of expectations. While the strength of the dollar has hit operating margins by lifting costs of clothing made in Asia and priced in the U.S. currency, Primark is gaining market share in the U.K., it added.

“Whilst the backdrop for U.K. retail in particular of course remains uncertain, the first-half results and outlook should offer some comfort,” analysts at Barclays said in a note.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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