Primark hails Covid rebound and aims for faster US expansion
The owner of fast fashion retailer Primark said today it expects group profits to rebound above pre-Covid levels in the first half, although same-store sales at its stores stocks remain down 9% from 2019 levels.
Primark is also continuing its expansion in the United States, with around a third of new openings planned in North America.
In a trade update, umbrella owner Associated British Foods (ABF) – which also includes drinks brands Twinings and Ovaltine, food brands Ryvita, Jordans and Kingsmill, as well as its sugar business – said it expected that total sales and operating profits would be significantly ahead. of the same period in 2021.
Primark’s sales for the first half to March 5 are expected to be more than 60% higher than last year, while the impact of soaring raw material costs and supply chain issues of its Primark operation was mainly offset by reduced store operating costs and a favorable exchange rate with the US dollar, the company said.
ABF said it was trying to balance the rising cost of raw materials, commodities, energy and the supply chain and in January Primark announced plans to cut the number by 400 manager-level jobs in its retail stores.
The company said. “Price actions inevitably lag behind input cost inflation. As a result, we expect some reduction in margins in these three businesses during the six-month period, but expect our plans to allow for a recovery in the execution rate of these margins by the end of the year.
ABF said its net cash increased to $2 billion from $945 million the year before, when store closures cost it more than $805 million. It was also boosted by the sale of fall and winter inventory carried over from the previous year.
“All of our stores are operating and remained open throughout the semester, with the exception of short periods of store closures in Austria and the Netherlands,” said the company, which operates a network of more than 400 stores. including 191 in the UK. 27 stores over the past two years and recently announced its first store in Romania, set to open later this year in Bucharest, marking the 15and International market.
Primark’s US expansion plan
It is also accelerating its expansion in the United States with three new locations in the New York region: City Point in Brooklyn; Roosevelt Field in Garden City, Long Island; and Crossgates Mall in Albany. Primark now has five new leases signed in the New York area, with its Jamaica Avenue store in Queens slated to open next year, and another in Green Acres, Nassau County. These are in addition to a new store lease in Tysons Corner, Washington, signed earlier in the year.
The new leases continue the retailer’s steady expansion path in the United States since opening its first store in Boston six years ago. Over the past financial year, nearly a third of Primark’s new store openings have been in the US, including the most recent launch in September last year at Philadelphia’s Fashion District, its 13th store in the country.
Primark intends to accelerate its expansion, and over the next five years Primark expects the US store base to grow to around 60 stores. The US business performed well over the past fiscal year, recording like-for-like sales growth of 6% – excluding its downtown Boston store – compared to two years ago.
Primark new US president
Reflecting the increasing pace of expansion in the US, Primark has strengthened its management team with the appointment of a new Chairman to lead its US operations. Kevin Tulip, who most recently led Primark’s Benelux business, will lead US retail operations while former chairman Andy Stewart will take on the new role of US business development director.
The company added, “The pressure from supply chain disruptions experienced in the fall has continued to ease despite some shipping delays and slightly longer lead times. With our equity purchases well underway for the second half of the year, we expect some reduction in operating profit margin from that achieved in the first half, reflecting further inflationary pressures.
Primark anticipates additional growth potential in all of its existing markets. It has 11 new store openings confirmed this year in Italy, Spain, the Czech Republic and Ireland alongside the Queens store. In addition to the United States, Primark intends to focus this expansion on its European markets of France, Italy and the Iberian Peninsula, while continuing to grow in Central and Eastern Europe. Over the next five years, Primark expects its store base to grow to 530 stores.