Primark sees lower sales in H2 as wet weather in UK, Ireland hits footfall

5th Sep 2024 07:04

(Sharecast News) - Like‐for‐like sales at Primark were expected to fall by around 0.5% in the second half of the financial year due to wet weather in the UK and Ireland which hit womenswear and footwear, said parent company Associated British Foods.

Primark revenue growth was expected to be around 4% for the period, driven by a strong contribution from its continued store expansion programme.

The full-year outlook for Primark adjusted operating profit remained unchanged with profit margin expected to be slightly more than 11.5% after an increase in product gross margin, largely due to lower material and freight costs and foreign exchange improvement.

However, these were partially offset by labour cost inflation and increased investment in digital and data capabilities, technology and brand marketing.

"We expect Primark to deliver good sales growth in full-year 2025 as we continue to execute our store rollout programme and our product, digital and brand initiatives," AB Foods said in a trading statement.

It added that adjusted operating margin in 2025 should remain "broadly in line with this year's level, as gross margins stabilise and we step up investment in strategic initiatives to drive sustainable growth".

While volumes were soft, average selling prices increased as a result of mix. Discounts were "managed effectively" and Primark expected to exit the year with good inventory levels.

In the UK, second-half sales were expected to be around 0.5% lower and down 2% on a like‐for‐like basis with footfall impacted by challenging weather, particularly in April and June.

In Europe excluding the UK, sales growth was forecast to be around 5%, with a strong contribution from space expansion. Most markets in Europe delivered strong growth in the half, including Spain, France and Italy. Like‐for‐like sales growth is expected to be around 0.9%.

"Ireland was a notable exception, with weather‐impacted performance more in line with the UK. There were eight new store openings during the period: three in Spain, two in Italy, one in Ireland, one in Romania and our first store in Hungary."

Good progress continued in the US and sales growth was forecast at around 25%. Three new stores were opened and the first US marketing campaign in the New York area was launched as part of a drive to increase brand awareness.

AB Foods added it was extending its £0.5bn share buyback by £100m after strong cash generation this year.

Reporting by Frank Prenesti for Sharecast.com