Primark juggernaut powers on as expansion spurs sales

Total sales at the value fashion giant, which celebrates its 40th birthday this year, jumped 20% to £2.3bn. The figure represents 25% of parent company Associated British Foods’ total sales. Adjusted operating profit rose 8.2% to £252m.

ABF said that the retailer delivered “exceptional” sales and profit growth “even though each of its three main markets were subject to recessionary pressure and a decline in consumer confidence”.

It added that Primark was “in the vanguard” of the growth of the value sector.

However, operating profit margin was affected by the increased fixed overheads at its new distribution centre in Thrapston, Northamptonshire. Margin declined from 12.1% to 10.9% in the year, but Primark said margin impacts were offset by better buying, lower freight costs and a more profitable sales mix.

Margins were also hit by the weakness of sterling, which increased the cost of product sourced in US dollars. Primark forecast that margins would continue to drop in the run-up toChristmas but improve at the beginning of 2010 with the benefit of forward buying of dollars at improved exchange rates.

Total sales growth was driven by store openings. Primark opened 12 shops in the year - five in Spain, four in the UK and its first stores in the Netherlands, Germany and Portugal. Primark now has 191 stores and 5.9 million sq ft of selling space - an increase of 9% since the end of the previous year.

Primark said its stores in continental Europe performed “well” and plans are in place to open 11 in the coming year, including a debut shop in Belgium.

The value retailer added that organic growth was achieved through Primark’s “strong competitive position, its highly appealing merchandise and better weather than last year”.

In September Arthur Ryan announced that he would step down as chief executive of the group to concentrate on his role as chairman. Paul Marchant has taken over as chief executive.

Investec analyst Martin Deboo said Primark’s performance was “good in the round” and in line with market expectations.

Panmure Gordon analyst Graham Jones said its like-for-like growth was “impressive” and the impact that the weakness of sterling had on margins was “well managed”.