Primark’s value offering drives its popularity as stores reopen, says GlobalData

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Following today’s release of Primark figures for H1 FY2020/21; Pippa Stephens, Retail Analyst at GlobalData, a leading data and analytics company, offers her view: “With the majority of Primark’s retail space having been shuttered for most of H1 FY2020/21 as a result of COVID-19 restrictions, its revenue plummeted by £1.5bn to £2.2bn. Nonetheless, in England and Wales it has unsurprisingly been one of the most in demand retailers since the reopening of non-essential stores on 12 April, with queues experienced outside its major locations, footfall returning to pre-COVID-19 levels and record sales achieved across much of its estate. Its popularity is a result of its wide appeal product ranges and value price positioning, with the latter becoming increasingly favourable to consumers amid this period of economic uncertainty. However, with many of its European markets recently introducing new lockdowns, Primark estimates that it will lose another £700m in sales in H2.

“Primark’s strong presence in international markets outside of the UK provided a lifeline during H1 FY2020/21, due to lesser impact of store closures, aiding its adjusted operating profit to successfully stay in the green at £43m for the period. With all stores open in the US, performance in the region was promising, with like-for-like (l-f-l) sales down by just 11%. Stores in several of its EU markets were also able to continue trading, though reduced opening hours and travel restrictions caused l-f-l sales to fall by 20%. Despite the ongoing turbulence, Primark still plans to add nine more stores to its portfolio in H2, in locations such as Spain, Italy and Poland, following the six that opened in H1. As it has implemented in some stores in the Netherlands, Germany, and Belgium, it should introduce a pre-booking system in these stores when they open, as this will help boost consumer confidence to visit until the rollout of the vaccine advances further.

“Though nightwear and loungewear have remained strong sellers for Primark since reopening, it has also started to see increased demand for its more fashion-led ranges, particularly in womenswear, as the opening of UK retail is synchronised with outdoor hospitality. Therefore, it should review as much of its upcoming ranges as possible to ensure that it has enough fashion styles in stock to meet the demands of its customers. Moreover, having been left with £150m worth of spring/summer and £260m of autumn/winter stock from last year, it must resist applying heavy discounts to help protect its margins, and instead carefully time the release of different products depending on the phasing of the pandemic to maximise sales.”