Primark's biggest 'destination' stores suffer 'significant decline' as tourists stay away
On the flip side, sales at the chain’s out-of-town stores in retail parks are higher than a year ago, after they reopened following the easing of lockdown restrictions.
In a trading update to investors, parent company Associated British Foods (ABF) said sales at the high street giant have beaten expectations over the past quarter after reopening. Overall, sales have been “reassuring and encouraging” since the stores welcomed customers back in June.
The consumer group said trading in its food divisions had also been better than predicted so far in the fourth quarter, as it provided a pre-close trading update for the financial year to 12 September.
It expects to report around £2 billion in Primark revenues in the period between reopening its stores and the end of the year. Sales have been driven by larger customer baskets with transaction sizes initially “significantly higher” than last year due to “pent-up demand”.
ABF chief finance officer John Bason said: “We are encouraged that we’ve seen broadly-based progress, but I think the particularly strong takeaway has been the power of the Primark brand.
“Having been closed for three months obviously caused pressure, but all over the country we’ve seen sales above what we were seeing last year.
“We saw big baskets in June but recent sales haven’t been due to pent-up demand and that’s really encouraging. July was great and ‘back to school’ meant we saw a terrific end to August.”
The group said sales at stores in retail parks have been higher than last year, while shopping centre and regional high street stores are broadly in line with their average.
However, the largest stores in major shopping destinations have been hit by a significant slump in footfall amid lower numbers of tourists.
In the UK, like-for-like sales since reopening are expected to be 12 per cent lower than the same period last year after being weighed down by weaker performances at Primark’s four largest stores.
ABF said adjusted operating profits at the Primark business are now expected to be “at least at the top end” of its previous forecasts of £300 million to £350m.
Neil Wilson, chief market analyst for Markets.com, said: “Is there a better guide to the health of the high street than Primark? The cheap-as-chips clothing jumble sale is about as good a barometer as any for what’s happening, with Next going increasingly online and M&S not what it once was in clothing and more of a grocer than ever.
“Primark also doesn’t do online so we get an unmuddied view. So, it’s good news that AB Foods reports Primark sales have bounced back strongly since reopening.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, noted: “It appears Primark customers remain remarkably loyal, lured by the chain’s fashion credentials and value offering. Strong in store sales over the summer, without the need to discount, has meant a significant proportion of extra stock was also sold.”