Primark sales are expected to grow by 4% in the first half with stabilised like-for-likes, ABF has reported. Here’s the City’s reaction.

“Though the first half has been challenging, Primark’s appeal remains resilient, with its proposition evidently welcomed in new markets and its trend-led fashion ranges and regular newness ensuring it retains its competitive edge in the UK.

“Further development of its homewares and health and beauty offers is a must for the second half to enable it to grow its destination appeal and increase basket sizes.

“The retailer opened six new stores in the first half, ending the period on 299 stores over 11.5 million sq ft. Its French operation has recorded exceptional trading with strong like-for-likes. While we expect further roll-out to satiate demand, the challenge is to maintain the high sales densities it has previously achieved in the years to come.

“Primark remains committed to the US, with six new stores planned for the second half, alongside its first Italian store. Supporting its continued European expansion is investment in increasing warehouse capacity. This summer its UK distribution centre will move to a larger facility in Northamptonshire, and a new warehouse in the Netherlands will also open.

“Primark maintains a measured approach to expansion – and while further European market entry is unlikely in the short term given the focus on Italy, Primark must not lose sight of existing domestic operations, with investment much needed to bring its UK store network up to a consistent stands in terms of design and environment.” – Kate Ormrod, Verdict Retail

– 

“Unsurprisingly, the trading update reveals little change to the trading patterns reported just five weeks ago for the first 16 weeks of the full year.

“Operationally at Primark, like-for-like sales are guided to flat for the first half, following some improvement in recent weeks, but we think this is broadly in line with existing market expectations.

“Anticipated new selling space for the full year is unchanged too, at 1.4 million sq ft; as is the better than originally expected margin performance owing to a strong performance from buying teams and a relatively low level of mark-downs, as reported at the 16-week stage.

“There is little to highlight in terms of changing trends elsewhere in the business.” – Alicia Florry, Canaccord

 –

“Actual sales were up by 4%, with a 7.5% increase on a constant currency basis. After relatively volatile trading through the period, first-half like-for-like sales are “expected to be level with last year”, which is a little more subdued than Shore Capital and market expectations.

“The operating profit margin has been better than expected, as guided in the January update, with lower than expected mark-downs despite the weaker trading and good work from the buying team offsetting pressure from the stronger US dollar.

“Retail selling space increased by 0.3 million sq ft over the 24 weeks (+0.75m sq ft year-on-year), taking total space to 11.5 million sq ft. Management has reiterated guidance from January that it expects 1.4 million sq ft of new selling space in the full year, including the first store in Italy and a further six stores in the US. Early trading in the two US stores is said to be encouraging, with the range and concept being well received.

“We deem these terms to be robust, albeit not the language of the hullabaloo that received Primark in France, where like-for-like sales on near record opening densities continue to be strong.

“In Northern Europe (Germany and the Netherlands), we are pleased to hear the headwind on like-for-like growth from new store openings has eased.” – Darren Shirley, ShoreCap

”Today’s pre-close from the conglomerate Associated British Foods flags that Primark like-for-like sales have picked up since Christmas and will be level in the first half to end-February, driven by a strong performance in France.

“Primark also flags that “early trading at our two new stores in the US has been encouraging with the range and concept being well received” and that the operating profit margin in the period has been better than expected, “with much of the impact of the stronger dollar being mitigated by a good buying performance and a lower level of markdowns arising from a well-managed stock position”. – Nick Bubb, independent retail analyst