Primark’s resilience post-COVID-19 aided by value proposition, says GlobalData

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Following today’s release of Primark FY figures for 2019/20, Pippa Stephens, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Despite being one of the worst hit fashion retailers during the peak of COVID-19 due to its lack of a transactional website, Primark has exhibited impressive resilience, with trading exceeding expectations since its stores began to reopen in May. The retailer’s value proposition and wide appeal product ranges led to pent up demand while its stores were closed, with long queues being experienced outside many of its locations upon reopening. Though adjusted operating profit for the financial year will understandably come in significantly lower than FY2018/19, this is now anticipated to be at the top end of the £300-350m range previously estimated in July, as higher basket sizes have helped it to counteract the impact of reduced footfall. While there has been increased discounting at many of its fashion competitors, Primark has also managed to minimise markdowns during the period, enabling it to remain more profitable.

“Primark’s retail channels have experienced ongoing disparity since stores reopened, with city centre locations dragging down its top line sales across all regions due to a decline in tourism and commuters. Though in the UK, the government is now encouraging the public to return to work and make non-essential travel journeys again, consumers are still likely to refrain from visiting these busy areas for some time, leading to a long-term decline in footfall. Its retail park stores have been much more resilient, with trading reportedly higher than last year, so Primark should put greater investment into these locations through longer opening hours and store refurbishments to help attract shoppers. While COVID-19 has caused a delay in new store openings, three locations have opened since July, with the positive performance of its Warsaw store boding well for its second Polish opening in Poznan next year.

“With consumers becoming increasingly aware about the environmental implications of their purchases and behaviours during the COVID-19 crisis, Primark has sensibly accelerated its focus on sustainability by launching a new recycling programme in the UK, enabling shoppers to donate unwanted fashion from any brand, and more recently introducing a greener delivery fleet to cut emissions. However to improve its reputability further, it still needs to use more sustainable materials within its core ranges to gain shopper trust. Amidst the recent controversy regarding fast fashion businesses in the UK, following allegations against the boohoo group’s poor working conditions within its Leicester factories, Primark must also take further action to strengthen its ethical practices, with greater transparency around the sourcing of its products necessary to enable it to become more competitive with other value players like H&M.”