Primark bounces back with further growth

Not even the credit crunch can prevent us stocking up on cheap clothes at Primark...

by
Last Updated: 06 Nov 2012

Primark’s owner Associated British Foods said this morning that like-for-like sales would be up by 2% in the second half of its financial year (which runs up to September 13). This suggests that the budget clothing retailer has bounced back from a lacklustre third quarter by recording a sales increase of about 4% in the last three months. The return to form means its revenues and profits will both be up for the year as a whole – at a time when many retailers are struggling to keep their heads above water.

As a veritable temple of cheap chic, it’s not surprising that Primark is attracting the bargain-hunters – and not even our dismal summer weather could seemingly put them off. By the end of the second half it will have 5.4m sq ft of retail space across 181 stores, having opened three more in the UK plus another five in Spain, where it is continuing its expansion. It also has a presence in Ireland and is about to start targeting Germany and the Netherlands. Isn’t there supposed to be a credit crunch on?

To be fair, ABF has to borrow money to fund this kind of expansion, and that does bring associated costs: higher debt means higher interest charges, which will certainly take a bite out of profits – as will higher input costs, as the price of buying materials and energy continues to climb. But according to ABF, these increased costs – and a decline in its European sugar trading profits – will be more than offset by the growth in its grocery and agriculture divisions, not to mention the retail business.

And with a new Primark distribution centre about to open in Northamptonshire that will increase its UK operating capacity by 50%, this is one retail success story that looks set to run and run for a while yet...


In today's bulletin:
Britain bounces after US mortgage bail-out
Primark bounces back with further growth
EDF powers back into British Energy deal
Falling management pay bucks union claims
Rose wine provides some consolation

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today