Primark struggles to recover to pre-pandemic levels despite ongoing store expansion, says GlobalData

Following today’s release of Primark’s figures for H1 FY2021/22; Pippa Stephens, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Primark’s total H1 FY2021/22 sales grew by £1.3bn to £3.5bn in H1 FY2021/22, however, this was largely due to it being up against weak comparatives, with COVID-19 restrictions in H1 FY2020/21 forcing stores in Europe to remain closed for most of the period. Versus pre-pandemic levels, total sales remained 4.6% down, with like-for-like (l-f-l) sales 10% lower despite most stores being open for the entire period, except for short-lived closures in Austria and the Netherlands. This was partly a result of the rise of the Omicron variant towards the end of last year negatively impacting footfall, however it also begs the question of whether Primark’s l-f-l sales will ever return to pre-COVID-19 levels now that a significant proportion of clothing & footwear spend has shifted online. Its adjusted operating profit has also seen a massive uplift of £371m year-on-year to reach £414m, though remains 6.1% down on a two-year basis.

“Primark continues to outperform in the US, with sales up 37% versus pre-pandemic due to its store expansion in the market, and two-year l-f-ls rose 1%. However, the retailer is still struggling in its crucial markets of the UK and Continental Europe, with l-f-ls remaining 8% and 14% lower than 2019 respectively. Despite this, Primark remains committed to growing its physical estate, having opened four stores in Continental Europe in H1 FY2021/22 with further expansion in the US, Iberia, France, and Italy in the rest of the financial year. As a result of this, it now anticipates that total sales in the second half will be ahead of H2 FY2019/20.

“It has also been investing significantly in its digital proposition, having launched its revamped website in the UK at the end of April 2022, allowing shoppers to see live instore stock information. This will help the retailer attract more shoppers to its stores, with 48.0% of UK consumers stating in GlobalData’s February monthly survey that a website that shows the products available instore would make them more likely to purchase from Primark. Its next step should be the implementation of click & collect, as of the 56.6% of Primark shoppers that cited that they would prefer to purchase its products online, 76.6% would still do so if click & collect was the only option.

“Primark has stated that it was able to mitigate the ongoing supply chain cost increases throughout its first half thanks to favourable US dollar exchange rates and a reduction in store-related costs, protecting its operating profit margin which stands at 11.7%. However, the retailer expects this margin to take a hit in H2 FY2021/22 as raw material and shipping costs continue to rise even further, leading it to implement price increases across some of its autumn/winter ranges. These issues have been exacerbated further by the Russia-Ukraine conflict, as while it does not conduct business in either country, it has manufacturing sites in Moldova, Romania and Bulgaria, which are likely to have been disrupted. However, inflationary pressures on shoppers’ discretionary spending will provide an opportunity for Primark as many consumers will feel the need to trade down to value retailers.”