Primark's sales to jump this year as shoppers turn to discount retail

 
Helen Cahill
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Victoria Justice Celebrates Primark's Fifth US Store Opening In Willow Grove, PA
Primark has been boosting its store portfolio (Source: Getty)

Primark's market share has grown "significantly", the brand's owner Associated British Foods (ABF) said this morning, as the chain benefits from a slowdown in consumer spending.

The figures

ABF said full-year sales at Primark were set to rise 13 per cent on last year on a constant currency basis. However, the growth will be largely based on the opening of new stores, the company said, with like-for-like sales growing by one per cent.

Read more: Lidl overtakes Waitrose to become seventh-largest supermarket in the UK

Primark's UK sales are expected to be 10 per cent higher. ABF said its share of the UK market had risen "significantly".

Meanwhile, revenue and profit in ABF's sugar business will be "well ahead" of the prior year.

Why it's interesting

Data released today from Visa found that the UK is on track for its worst year of consumer spending since 2013, but there have been some winners in the retail sector. Aldi and Lidl continue to grow apace, taking advantage of shoppers' increased focus on price; Lidl recently leapfrogged Waitrose to become the seventh-largest supermarket in the country.

And it appears that cut-price Primark, which expanded its Oxford Street flagship by 40 per cent this year, has also benefited from the shift to discount shopping.

George Salmon, equity analyst at Hargreaves Lansdown, said:

The UK has been singled out as performing particularly strongly, which would normally have positive read-across for the rest of the clothing sector. However, this probably isn’t the case this time. We feel Primark’s good domestic performance is more a sign the UK consumer is tightening the purse strings and moving down the value chain as inflation outstrips wage growth.

Neil Wilson, senior market analyst at ETX Capital, said: "If consumer spending is slowing, Primark is the sort of brand that benefits. At the same it continues to build out its presence in the US, but it's slow progress."

What ABF said

On the impact of currency movements, ABF said: "With most of next year's first half UK purchases contracted at the weaker sterling/US dollar exchange rate than the same period last year, there will be an adverse effect on margin in the first half.

"However, the strengthening of the euro against the US dollar in recent months will have a beneficial transaction effect on Primark's Eurozone margins, particularly in the second half of the year if these rates prevail."

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