1H18 Results

British conglomerate ABF reported its 1H18 results on April 17. This report will focus only on Primark, ABF’s retail segment.

Sales

Primark’s 1H18 sales grew by 7% at constant currency and by 8% as reported to £3,477 million, driven by increased selling space. Comparable sales declined by 1.5% during the period, due to an unusually warm October when comps fell significantly. The company said that the last week of 1H18 was also challenging, due to freezing temperatures across northern Europe. The company said that Primark achieved record sales in the week before Christmas. ABF noted that early customer reaction to its Spring/Summer collection has been positive. UK: In the UK, Primark’s total sales grew by 8% during the first half, driven by a 3% rise in comparable sales along with increased selling space and breadth of offer. Rest of Europe: In continental Europe, sales grew by 6% year over year, driven by expanded selling space, but offset by a decline in comparable sales. US: In the US, Primark continues to grow its business and refine its operating model for its stores in the North East.

Operating Margin

Primark’s operating margin was 9.8%, close to the 10% level it recorded in 1H17. ABF said that better buying offset the adverse effects of the US dollar exchange rate on purchases. Inventory was managed efficiently, and markdowns were in line with those seen in 1H17, the company said.

Selling Space

Primark’s selling space expanded by 0.4 million square feet since the last financial year end. As of March 3, 2018, the company operated a total of 352 stores spanning 14.3 million square feet of selling space compared to 13.1 million square feet in the corresponding period last year.

Outlook

In the second half of the year, management expects Primark’s profit growth to accelerate as a result of margin improvement. The company expects better buying as well as “some benefit of the recent weakness of the US dollar” on purchases and consequent reduction in markdowns, to drive this growth. The company intends to add a total of 1.2 million square feet of selling space this fiscal year, by opening new stores in France, Germany, Belgium, Spain, the Netherlands, the UK and the US. At the group level, management maintained its full-year outlook, expecting progress in both adjusted operating profit and adjusted earnings per share.