Primark outperformed the fashion market with sales breaking the £1bn mark in its first half, but warned margins will come under increasing pressure.
In the 24 weeks to February 28, sales at the value fashion retailer grew 18 per cent to £1.06bn on profits up 10 per cent to £122m.The sales increase reflects the increase in selling space to 5.6m sq ft. However, like-for-likes grew 5 per cent during the period.
Operating profit margins at the retailer, which is owned by Associated British Foods, were impacted by the increase to fixed overheads following the opening of its distribution centre at Thrapston. Margins will come under increased pressure during the second half from the effect of the weakness of the pound against the dollar, it said.
However, Primark said that the effect would be “mitigated in part” by lower supplier prices and freight costs.
At the end of the half year, Primark was operating from 187 stores. It invested £70m in opening new stores since the year end, including three stores in Spain, taking the total in the country to 12.
Primark said early trading in its store in Rotterdam in the Netherlands was “very encouraging”. It also opened in High Wycombe and Corby in the UK.
It will open seven stores in the second half in Bristol, Cambridge and a resite in Tooting. Two more stores will open in Spain and it will open its first stores in Germany, in Bremen and Portugal in Lisbon. Retail selling space is set to be 5.9 m sq ft at the year end. Primark will create 2,300 jobs during the year as a result of its expansion plans.
Outgoing Associated British Foods chairman Martin Adamson said: “Primark, along with its competitors, operated in an extremely tough consumer environment. It was nevertheless able to deliver excellent sales and profit growth confirming that its merchandise and pricing are attractive in all market conditions. At the same time it is continuing to expand its reach with new stores and extensions in existing markets and by testing new markets overseas.”