The owner of Irish fast fashion giant Primark is expecting to take a total hit from inflation of $2.3 billion this year and next
However, the group also plans to push ahead with expansion across the States and will open 10 more stores in the U.S. in the year to September, on top of the 13 stores already operating in North America.
Indeed, the U.S. remains a buoyant market for Primark and total Q4 sales should be around 27% ahead of pre-Covid levels, the company said, driven by new store openings, with comp. sales close to pre-Covid levels.
However, parent company Associated British Foods (ABF) issued a stark warning during its annual results statement that a weak consumer backdrop in Europe and the U.K. would also pose the business major challenges going into the crucial holiday season.
ABF said that it had experienced what it described as the most challenging economic conditions for many years, with sharply rising and broadly based inflation, with prices at Primark up by about 8% this Fall.
However, despite the ongoing inflationary pressures, ABF pledged that it had no further plans to raise prices over the coming months at Primark, as it tried to shield hard-pressed consumers from the worst of soaring costs. The retailer has not increased the price on about half the merchandise it sold, including children’s apparel.
Volatile Conditions For Primark
George Weston, the ABF chief executive, said: “Looking ahead, substantial and volatile input cost inflation will be the most significant challenge in the new financial year, and our businesses will continue to seek to recover these higher costs in the most appropriate way. Primark has faced significant input cost inflation and sharply moving currency exchange rates.
“We have decided to hold prices for the new financial year at the levels already implemented and planned and to stand by our customers, rather than set pricing against these highly volatile input costs and exchange rates.”
ABF revenues rose 22% to $19.7 billion in the year to September 17, while pre-tax profits jumped 48% to $1.2 billion.
Primark recorded total sales of $8.9 billion, 43% better than last year, as U.K. comparable store sales and market share caught up with pre-pandemic levels.
The situation in Continental Europe is not so rosy.
Primark said it would close two stores in Germany and optimize further stores after taking a $238 million write-down on the business there as sales have not returned to pre-pandemic levels. The company reported caution in consumer markets across Continental Europe.
Primark Trials Click & Collect
Primark also recently announced that it will launch its new click & collect service in 25 stores located across the North West of England, Yorkshire and North Wales before the end of the year. The mix of Primark stores taking part in the new trial ranges from large city centre and out-of-town stores to smaller high street locations, including Manchester, Liverpool, Sheffield, Blackburn, Carlisle, Sheffield and Wrexham.
The pilot will offer customers the opportunity to shop an extended kids’ range – spanning clothing and accessories, nursery products and toys – and will also include hundreds of items exclusive to click & collect, and will mark the first time that Primark has offered customers the option to buy online and then collect in store.
Primark chief executive, Paul Marchant, has continued to stress his company’s dedication to store-based retail – not least with the recent opening of its spectacular Belfast, Northern Ireland flagship – and he said previously that the company want to grow its stores to 530 from the current 408 by the end of the 2026 financial year.
Marchant says of Primark’s approach: “We continually challenge ourselves on the in-store experience. That includes the way we lay out our trend rooms to showcase the latest products, the way we pull stories together and how we complement the shopping experience with other social activities.”
The company now includes within some of its stores Disney shops, nail and beauty bars, cafes (including the Friends Central Perk cafe, Disney Cafes, plus Tasty by Greggs, which launched an outlet on Tottenham Court Road, London recently.