Value fashion retailer Primark has reported good trading results for its Christmas quarter (Q1), with sales 4.5% ahead year-on-year at constant FX (+3% actuals). In the UK, the company delivered 4% sales growth during the 16 weeks to 4 January 2020, albeit with a marginal decline in like-for-likes. Primark cited strong performance in its core segments – clothing, footwear and accessories – over the November and December period.

This was also the first Christmas for the retailer’s megastore in Birmingham’s former Pavilions centre – now the world’s biggest Primark. This has not only driven significant new business for Primark’s Midlands region, but has bolstered its reputation as a world-class retailer, with superior store design, retail theatre, on-site services and its well-received Disney café making it a global retail destination.

In the Eurozone, sales grew 5.1% at constant FX, with a rise in LFLs and a particularly good showing in Italy and France, where the business has also been investing in new selling space.

Improvement in Germany, which had come up weaker in prior reports, indicates the retailer is beginning to accurately finesse the formula in the market. Meanwhile, in the US, LFLs grew, but overall the strength of US dollar means the retailer’s group profit margin for the period declined slightly, with its global purchasing power somewhat diluted. That noted, tight control of costs and overheads helped to stymie the effects.

Looking ahead, Primark announced its intention to add 18 new stores to its 376-strong chain this financial year, totalling 0.9 million sq ft net new selling space. This indicates a continued focus on growth through space, making the fashion retailer unique in its decision to focus exclusively on the physical channel.

Kantar’s Point of View:

In the context of a sustained trend towards digital across the industry, Primark has significantly improved its comms and engagement through these channels, but the priority will remain driving footfall, not online traffic. CEO Paul Marchant did tell analysts at the Birmingham opening that some kind of click and collect offer was being considered, but nothing of substance has emerged since.

We also anticipate a shift in the territorial focus, from mature markets to emerging opportunities in Central & Eastern Europe. The recent quarter saw it begin operations in Slovenia, while leases have already been signed in Poland and the Czech Republic. This is a timely move, given we are seeing an acceleration in the value apparel sector across the CEE, with the likes of Germany’s Kik recently making Poland its eighth CEE market, and Pepco, sister banner of Poundland and Dealz, aggressively rolling out across the region.

East of Berlin, Primark’s value-offer will hold strong appeal for upwardly mobile, aspirational consumers seeking to participate more in global fashion trends without paying the exorbitant prices that often come attached. Compared to the retailers mentioned above, Primark could even position itself as an affordable mid-market option in contrast to its perception in Western Europe.

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