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Primark Leaps Over Struggling UK High Street With Strong Christmas Trading

Isabel Togoh
Primark Leaps Over Struggling UK High Street With Strong Christmas TradingImage by DennisM2, CC BY-NC-SA 2.0 via Flickr.

Topline: Fast fashion giant Primark appears to have sidestepped the malaise hanging over British high street, as its parent company Associated British Foods (ABF) reported strong Christmas sales for the brand.

Primark’s parent company said sales at the retailer in the 16 weeks to January 4 were 4.5% ahead of last year, attributed to a rise in the number of stores with openings in Spain, Italy, Germany and Portugal in the last quarter.

In the U.K., sales were 4% ahead of last year, the group said, with trading “particularly good” over the key Christmas months of November and December. Like-for-like sales were marginally down.

Across Europe, sales were 5.1% ahead of last year, boosted by progress in France and Italy as well as Germany, and sales also grew in the U.S, a traditionally tough market for British retailers.

But operating profits were hit by a stronger dollar, which made U.S. purchases more expensive, but ABF said this was offset by a fall in the price of fixed costs and the cost of goods.

Shares of parent company ABF, which is also one of the world’s largest sugar and yeast producers, rose by 2.50% to 2616p ($34.17) a share off the back of the trading update.

What to watch for: The retailer will open 18 new stores this year, including its first store in Poland this Spring.

Key quote: “Was there a degree of caution by the UK consumer (in the run-up to Christmas)? Possibly yes. But I find the comments about gloomy forecasts for the UK consumer surprising, I really do,” John Bason, finance director of Associated British Foods told Reuters.

Key background: Primark’s formula of fast fashion, low prices has helped it grab the largest share of the UK’s clothing market despite shunning online sales. It’s rivals John Lewis and Marks & Spencer shared weak Christmas sales, as did supermarkets Tesco and Sainsbury’s who had been anticipating a post-election surge in demand. Primark’s parent company Associated British Foods, which is majority owned by the family of chief executive George Weston, are up 20.4% on the year despite December capping off Britain’s worst year for retail since 1995, according to the trade body British Retail Consortium.

Image by DennisM2, CC BY-NC-SA 2.0 via Flickr.

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