RECEIVED wisdom tells us that shoppers flock to quality in times of hardship. With less cash to spend, punters buy fewer items that are more likely to last.
Primark’s performance would suggest otherwise. Sales in the last sixteen weeks have climbed nine per cent at constant currencies, and Shore Capital estimates like-for-likes are up seven per cent (ABF?doesn’t list them in its third quarter update).
It is also continuing to open new outlets, even launching two new stores in recession-strapped Spain, where it hopes to pinch customers from more upmarket rivals like Zara and H&M. And thanks to its high operational gearing, margins are getting better despite higher fixed costs, climbing 50 basis points to around 11.5 per cent.
Sales growth will now slow down some, as the company battles against tougher comparatives. With that in mind, its valuation of around 13 times estimated 2011 earnings looks fair. Hold.