- Primark’s parent, Associated British Foods (ABF), reported its FY18 pre-close trading update on September 10. This report focuses on results for Primark, the company’s retail division.
- Primark guided its FY18 sales to grow 5.5% year over year on a constant currency basis, driven by an increase in selling space, offset by a 2% decline in same-store sales.
- The company expects its operating margin for FY18 to be 11%, well ahead of the 9.8% reported in 1H18 and last year’s margin of 10.4%, led by favorable exchange rate movement.
FY18 Pre-Close Trading Update
British conglomerate ABF has reported its FY18 pre-close trading update. This report will focus only on Primark, ABF’s retail segment.
ABF expects Primark’s FY18 sales to grow 5.5% year over year on a constant currency basis, driven by an increase in selling space, offset by a 2% decline in same-store sales.
UK: In the UK, ABF expects Primark’s total sales for FY18 to grow by 6% year over year, increasing its market share “significantly.” Same-store sales are expected to grow 1.5%.
Rest of Europe: Spain, Portugal and the first four Primark stores in Italy showed strong sales performance, while same-store sales in Northern Europe have declined due to unfavorable weather conditions. However, the company guided that sales in Northern Europe will show growth led by increased selling space.
US: In the US, Primark opened a new store in Brooklyn; it continues to grow its business and refine the operating model of its stores to improve profitability.
Primark’s operating margin was 9.8% in 1H18, close to the 10% level it recorded in 1H17. The company expects its operating margin for FY18 to be 11%, well ahead of that of 1H18 and last year’s margin of 10.4%, driven by the benefit of a weakening US dollar on purchases.
Retail selling space increased by 0.9 million square feet this year led by 15 net new store openings. This brings the total store count to 360 stores with selling space of 14.8 million square feet compared to 13.9 million square feet a year ago. The company added five stores in Germany, four in the UK, two in France and one each in Portugal, Belgium, Spain, Netherlands and the US. The company also reported that a store was destroyed due to fire in central Belfast.
ABF stated that sterling exchange rate volatility could impact sales in the second half. In the next fiscal year, the company plans to open 14 new stores adding an additional 1 million square feet of selling space to its existing estate, with over 0.5 million square feet of space to be added in the first half.
Primark will move to new premises in Birmingham Pavilions which has selling space of 160,000 square feet and will be the largest store in the whole estate. New stores will be opened in Berlin, Germany; Toulouse and Bordeaux, France; Seville and Almeria, Spain; Brussels, Belgium; Utrecht, Netherlands; and Milton Keynes, UK.
Primark plans to open its first store in Slovenia in 2019.