I would hazard a guess that it was probably around the time Kourtney Kardashian was seen floating on a large blow up swan that Primark’s sales of pool inflatables really took off, writes Deirdre Hipwell, retail and M&A editor at The Times.
The discount chain has credited fierce demand for its pink flamingo pool inflatables as one of the key reasons for another stellar year which has helped boost profits at its parent company Associated British Foods.
However, pink flamingos aside (as lovely as they may be), Primark’s ability to outperform the market has been a given for many years but in one of the toughest retail markets since the recession the discount chain’s performance last year is really quite impressive.
To put Primark’s figures into perspective the retailer is expected to report next month that it has experienced a 10% rise in full price sales in the year to 16 September. In the UK its comparable sales will be up by 4% and it is on track to report £713m of operating profit. These are figures that Primark’s main rivals can only dream of. By comparison Next, the high street bellwether, only managed full price sales growth of 3.6% last year while the ever-struggling Marks & Spencer was more lacklustre with 2.7% growth.
Primark’s top notch showing has also come after a very difficult 2016 where its like-for-like sales fell by 2%, hit by poor weather, volatile consumer sentiment and higher-than-normal markdowns.
It seems that any nascent concerns that Primark’s star was starting to wane following a poor 2016 were clearly overdone.
John Bason, finance director at the ABF certainly thinks so. He told me earlier this week that Primark had a “stunning” second half and gushed: “Did you see our pink flamingos? They sold a storm and demand for our Harry Potter merchandise is massive.”
He believes that Primark’s success is based on the fact that its does retailing basics exceptionally well. The discount retailer has a good eye for emerging trends, its buyers purchase effectively, its scale allows it to employ keen pricing, and its stores offer a wide range that consistently pulls in shoppers, even in the age of online retailing. Primark is also effective at tailoring its products to suit consumer tastes in different markets, for example, fleecy pyjamas that are best sellers in Europe have fared less well in the US, so its American stores now stock lighter-weight sleepwear.
It is really no surprise that Global Data is now reporting that Primark is within a whisker of overtaking Next to become the UK’s second-largest fashion retailer behind Marks & Spencer. One imagines if Primark continues on its current form that it can’t be long until it is the biggest clothing store in the UK – after all, this is a retailer whose total share of the domestic clothing market has grown from 2.2% to 5.1% in just a decade, according to Fung Global Retail and Technology.
Primark’s property strategy has also played a key role in the ascent of the discount retailer. The retailer has a property team in every single country it operates in and is constantly looking for new opportunities, either for new stores or better sites to upgrade existing outlets.
Last year Primark expanded its global estate by 1.5m sq ft (30 new stores in nine countries) in one of the busiest years for its property teams since 2005 when it bought the Littlewoods chain. In the coming year Primark plans to be just as active and is planning an additional 1.2m sq ft of retail space. Bason said that the ramping up of its store expansion programme showed the retailer’s “capability” in property.
In the UK, Primark is currently focused on “infilling” towns and cities that still don’t have a Primark and extending or relocating other stores. For example, it has opened bigger and better stores in Sheffield and Reading and extended its Oxford Street East store by 40% during the year to take it to a bumper 114,000 sq ft. It is currently working on a creating a giant new Primark store at the Birmingham Pavilions shopping centre, which will open next year.
However, while UK store openings are still on the horizon the country is clearing maturing market for Primark now and much of the chain’s real estate attention going forward will be focused on growth in mainland Europe and the US. Bason said it knows where it wants to go abroad and it is simply a case of assessing opportunities as and when they arise – “It’s a bit like waiting for the number nine bus.”
