Yahoo Finance Primark owner bets on growth as shoppers shrug off higher prices
Sales surged at Primark in the last year as shoppers shrugged off higher prices, boosting the retailer’s bid to open new stores.
Associated British Foods (ABF) said on Tuesday that Primark’s UK sales rose by 11pc in the year to September, which fuelled the group’s 16pc jump in revenues to £19.75bn.
George Weston, chief executive of ABF, said Primark’s trading was “excellent” given high inflation and wet summer weather.
He said customers continued to shop at Primark despite “selective price increases partially to protect profitability”.
Mr Weston said the retailer had already brought some prices down as inflation eases.
“We’ve already brought the kidswear range down by 20pc. And then beyond that, we will remain the most competitive retailer on the high street. So our prices will be as sharp as ever. Certainly into spring and summer, we won’t be raising any prices,” he said.
He added the retailer was seeing high levels of theft, spurring it to invest in added security measures.
“We’re equipping all our security guards with body cameras. We’re investing in more CCTV and better CCTV. We’re investing in more security-guard hours in the stores. Those are the bits that we can do ourselves.”
Mr Weston reiterated ABF’s bid to open another 100 Primark stores by 2026, which will take the company’s global footprint to beyond 530 outlets.
He said the company also planned to refurbish existing stores “in quite large numbers” and install self-service checkouts.
“We’ve got self service checkouts now in 22 stores, and I think we will install them at about another 50 this year across various markets,” he said.
Shares in ABF rose almost 6pc as markets opened on Tuesday, as investors hailed the increased dividend to 60p per share, up from 43.7p last year. This included a special payout of 12.7p.
Despite the boost in revenues, Primark’s profits fell 3pc because of the rising cost of raw materials, energy and shipping.
However, Mr Weston said he expects profit margins to rise above 10pc as inflation cools, which will drive ABF’s “substantial recovery”.
He said: “With Primark’s margin now moving back to its historic levels, we view the future for this business with confidence.”
The company said sales had been boosted by a record Christmas last year, which included a resurgence in women’s partywear as shoppers returned to in-person festivities after the pandemic.
It also posted high sales of beachwear and luggage as demand for holidays rose.
ABF said collaborations with celebrities such as Rita Ora, Stacey Solomon and Paula Echevarria “surpassed expectations”, while its Barbie-themed range had proven “very successful”.
Total revenues at the company, which also owns Twining’s tea, Ovaltine and a large sugar business, rose 16pc to £19.75bn, with adjusted operating profits rising 5pc to £1.51bn.
Mr Weston said: “At the outset of this financial year the group was facing very significant economic challenges caused in part by major geopolitical events.
“Looking back on the year, it is clear to me that the group performed extremely well and is as a result now well positioned for the year ahead.”
ABF said it expects its grocery business to be stable and its sugar business to have “much better profitability in the year ahead” after facing “challenging” crop conditions over the last 12 months.
