Yahoo Finance Primark hikes profit forecast as sales soar above pre-pandemic levels
Primark has upped its profit forecast for the year following a surge in pent-up demand that saw its sales rise above pre-pandemic levels.
The budget retailer now expects profit for the full year, before the repayment of furlough funds, to be broadly in line with last year’s figures, up from a previous guidance of “somewhat lower”.
A lifting of lockdown restrictions in the UK saw the company’s revenues hit £1.6bn ($2.2bn) in the 16 weeks to 19 June, well ahead of last year’s third quarter sales of £600m. Like-for-like sales increased by 3% when compared with pre-pandemic revenues for the weeks since the reopening.
The firm said the performance reflected “an increase in both confidence and willingness to spend by our customers,” as consumers shifted from lockdown leisurewear to popular items such as blazers.
“There has been a strong response to our two hero womenswear ranges for spring/summer, Joyful Gelato and Garden Party, with the pink gingham and purple blazers selling out within weeks supported by digital marketing,” it said.
Shares in Primark’s parent company Associated British Foods (ABF.L) rose as much as 5% on the back of the news.
ABF, which also owns brands such as Ryvita and Twinings as well as a global sugar business, posted a 2% fall in total revenue year-to-date. The group’s sugar business grew 21% in the quarter due to strong volumes in Illovo and China, as well as by higher prices in Europe and Africa.
Primark’s revenue now comprises around 40% of owner Associated British Foods' total sales.
Primark suffered more than most retailers during the first national lockdown, which started in March 2020, as it does not sell online. However, it confirmed on Thursday that it will now launch a new website in 2022 to allow shoppers to browse items in stores.
Its current webpage shows only a snippet of its latest products but it does not give stock availability. Customers will now be able to view a much bigger range of its products before they shop in-store, as well as see details of stock availability at different stores.
The cheap fashion chain said: "The improved functionality of the website will allow us to showcase a much larger proportion of the Primark range and provide to customers range availability by store."
Read more: Retail sales record surprise fall in May
Harry Barnick, senior analyst at Third Bridge, said: "Primark's lack of an online presence is a threat to its future growth since COVID catalysed a huge jump in the number of online shoppers at the expense of the high street.
"Our experts say Primark will struggle to make its online channel work due to new costs such as returns, which can cost a retailer up to £7 per item to process and reduced impulse purchasing. Click and collect is likely to be a first step as it is easier to manage operationally and financially."
It comes just hours after US retailer Gap (GPS) became the latest victim of the high street crisis as it announced the closure of all 81 of its physical stores in the UK and Ireland.
Gap said the stores would close between late August and the end of September this year but it would continue to operate its online store in the UK and Ireland. Gap did not confirm the number of jobs that would go but is estimated to have employed at least 20 people in each outlet.
Read more: High street shoppers begin to return as restrictions ease
''The Gap-sized hole in the high street which will be left when the US retailer closes its final stores at the end of September will be hard to fill, given the big names which have already left bricks and mortar shops behind,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.
"But Primark, one of the big fashion chains left standing, is likely to clean up from Gap's exodus, attracting browsing shoppers whose options are dwindling.
"It is still turning heads on the high street, while one by one other fashion retailers fall by the wayside."
Watch: London's Westfield packed as queues for Primark wind around shopping centre
