Primark sees ups and downs in latest 12 months, owner hints at standalone spin-off for business

Primark’s owner Associated British Foods launched outcomes for the 12 months to 13 September on Tuesday and additionally hinted that Primark may sooner or later be operated as a separate business.

More of that later. First, these outcomes. ABF group income was down 3% at £19.459 billion and pre-tax revenue fell 26% to £1.413 billion. ABF ha in September already flagged its gross sales figures however let’s look at the Primark numbers in element. In its Retail division (that’s, Primark), gross sales grew 1% at fixed foreign money and have been “in line” on a reported foundation at £9.5 billion.

Adjusted working revenue elevated 2% to £1.126 billion and the adjusted working revenue margin was 11.9%, up from 11.7% a 12 months earlier.

It mentioned it noticed “good execution of store rollouts in Europe and the US [that] contributed 4% to sales growth”. And UK like-for-like gross sales improved in the second half because it renewed its give attention to Primark’s worth proposition and product supply. But in Europe, a powerful first half was adopted by weaker buying and selling in the second half.

What meaning in numbers is that the 1% enhance at Primark for the 12 months as an entire additionally translated into +1% in each the primary half and the second half. But on a like-for-like foundation gross sales for the 12 months have been down 2.3%, with a 2.5% first half drop and a 2% drop in H2.

For the UK and Ireland, which account for 45% of its complete gross sales, gross sales have been down 1% in the 12 months. They’d truly fallen 4% in the primary half however elevated 1% in the second half. That was clearly boosted by further promoting area as on a like-for-like foundation general gross sales for the 12 months in the area have been down 3.1%. They’d fallen 6% in the primary half however solely 0.4% in the second half.

While gross sales declined, Primark elevated its UK market share to six.8%. The decrease H1 gross sales mirrored a decline in the UK clothes retail market and notably weak purchasing exercise inside parts of Primark’s buyer base. There was an excellent sequential enchancment in H2 buying and selling in response to its stronger product supply, notably in womenswear, and elevated digital engagement, supported by extra beneficial market circumstances.

For the remainder of Europe complete gross sales rose 2% with a 5% rise in the primary half however a 1% fall in H2. On a like-for-like foundation European gross sales fell 1.5%, with a 1.1% first-half enhance and a 3.7% drop in the second half. Those gross sales account for 49% of its complete.

The like-for-like gross sales decline 1.5% was partly accounted for by the influence of recent retailer openings. In Spain and Portugal, Primark had sturdy underlying gross sales progress in H1 and whereas progress slowed in H2, it continued to outperform a weak Spanish clothes market. In France and Italy, gross sales have been flat, reflecting each difficult market circumstances and competitor depth. Growth in its newer markets in Central and Eastern Europe was pushed by new retailer openings. In its Northern European markets, gross sales declined barely, primarily on account of decrease gross sales in Germany in H2. The current restructuring of its retailer footprint in Germany and the Netherlands drove “much-improved sales densities and profitability”.

In its smaller American market (the area accounts for 6% of its complete) the numbers have been all optimistic. Sales rose 20% for the 12 months with a 17% rise in H1 and +23% in H2.

The US gross sales soar got here because it made good progress with its area enlargement programme, opening six new shops, together with its first in Texas and Tennessee. It now has 33 shops there with an extra 18 leases signed.

Upbeat on earnings and progress

ABF mentioned the adjusted working revenue revenue rise demonstrated “the strength of Primark’s operating model and focused cost optimisation. Gross margin improved due to favourable foreign exchange, supplier efficiencies and effective markdown management”.

And the corporate mentioned it has “significant white space in our growth markets in Europe and the US and in new franchise markets, and we are targeting new store rollouts to contribute around 4% to 5% per annum to Primark’s total sales growth for the foreseeable future. This year we signed our first franchise agreement with the Alshaya Group to enter the Gulf markets and made good progress towards the first store openings”.

As for that trace of a separation of Primark from the principle group, it mentioned the board “has been conducting a review of the group structure with a view to maximising long-term value. Although no decision has been taken, the outcome of this review may lead to the board deciding to undertake a separation of the Primark and Food businesses”.

The evaluate is being performed in session with ABF’s largest shareholder, Wittington Investments, “which remains committed to maintaining majority ownership of both businesses… The board will provide an update on the review as soon as practicable”.

So no information but, however watch this area.