New stores to fuel Primark sales growth
Primark expects to see its 2015-16 full year sales grow by 11 per cent, despite like-for-like sales declining.
New stores are driving a Primark sales upwards, with selling space up 9 per cent year on year. A net increase of 22 stores took the chain to 315 at the end of last year, a net increase of 1.2 million sqft.
Primark says it has been denied like-for-like growth due to unseasonal weather in both winter and spring, which plagued the UK in particular. Spain, France, Austria and Ireland performed well, while the Netherlands and Germany saw an improvement in their trading – as stores shake off the negative impact caused by new outlets.
The new 2016-17 year will once again bring further expansion for Primark, with an additional 1.3 million sqft already secured including five stores in Germany, two in Italy and an 89,000 sqft store in Amsterdam. Its US network will grow from five to eight stores, and while customer reaction has been positive, a more aggressive expansion plan is required to fully seize its US potential and drive the volume required for success.
Primark remains the cheapest option on the UK high street, however unlike rivals it does not have the benefit of online operations to flexibly shift the focus onto more transitional ranges and showcase weather appropriate collections online – not only limiting like-for-like growth, but also putting significant pressure on the management and visual display of store stock. In the UK, Primark is well placed to benefit as shoppers’ discretionary spend comes under further pressure in 2017 and 2018, however as consumers now place far more importance on value for money Primark must invest in quality, design and fit to convince shoppers to pay full price and support like-for-likes.
Moreover, given its visible investment in both homewares and beauty, Primark must encourage cross-sector shopping to further boost basket sizes.
- Kate Ormrod is a senior analyst with Verdict Retail.