In the year ended 16 September 2023, Primark's revenue came in better than expected with an increase of 17% to £9bn ($11bn), which ABF says was supported by selective pricing and a well-received range.
The retailer benefitted from strong foot traffic, new store performances, and website improvements.
ABF, which also operates large grocery, ingredients, and agriculture businesses, noted that while the conditions are still challenging for consumers, it has observed a reduction in inflationary pressures over the past year.
Adjusted operating profit for ABF as a whole was 3% lower this year compared to last year at £735m with margins of 8.2% reflecting decisions on pricing.
ABF explains weather conditions in the second half of Primark's trading period had an influence on sales. This was due to cooler summer temperatures in the UK and Ireland and heatwaves in Southern Europe.
Additionally, the UK experienced warm weather in August and September at the time when Primark launched its autumn/winter collections, which further affected sales.
In the UK, sales surged by 11% throughout the year, primarily due to a 10% like-for-like growth. This growth was significantly influenced by the launch of Primark's improved website.
Sales in Europe (excluding the UK) saw an 18% increase, while the US experienced a 24% growth, driven by space expansion.
In April, the company also expanded its click-and-collect trial to 32 more stores in London, bringing the total to one-third of its store network.
Senior analyst for consumer markets at RSM UK, Robyn Duffy said Primark was now benefitting from its increased footfall as it “stayed true to its core and closely aligned to its digital expansion, indicating that despite a shift into digital exploration, stores will be the primary driver for Primark’s sales performance going forwards.”
Key 2023 results from Primark
- Revenues reported as well ahead at £9.0bn
- Operating profit was up 30% at £717m
ABF explained Primark, which has 432 shops globally, is set to see its profits rise further as it benefits from lower raw material and freight costs.
Although the adjusted profit margin dipped to 8.2% as the business implemented “selective price increases” to protect profitability, shoppers continued to “shop with us enthusiastically”, stated ABF chief executive George Weston
Weston added that Primark’s margin is “now moving back to its historic levels” and ABF believes its adjusted operating profit margin will be above 10% with further improvement dependent on levels of consumer demand.
Primark must strengthen its digital proposition to aid performance in less established markets
Associate apparel analyst at GlobalData, Alice Price shared her views on Primark's performance:
"In FY2022/23, Primark reported a 17.0% increase in total sales to £9.0bn, as its superior product ranges and value proposition enabled it to stand out against competitors. Primark’s continued focus on store expansion across its 16 markets also bolstered its growth, as like-for-like (L-F-L) sales increased by just 8.5%.
"In constant currency, revenue grew 15%, and while the first half of the year saw sales grow 17%, the second half experienced a slight slowdown to 14%, as high inflation continues to hit shoppers in Europe and the US, resulting in smaller basket sizes. Despite implementing price increases across selected products, it has taken a cautious stance on raising them too much, leading its operating profit to decline by 2.8% to £735m and operating margin to fall by 1.6ppts to 8.2%.
"Fewer COVID-19 disruptions in FY2022/23 allowed for particularly strong performances of its Christmas and summer lines, and though it is now up against tough comparatives, it expects continued revenue growth in the coming year and operating profit to rise to over 10%.
The UK remains Primark’s strongest performing region, with L-F-L sales growing 10%, benefiting from a strong reception to its website, which now includes click & collect and a stock availability checker. Despite unseasonable weather impacting the launch of its autumn/winter ranges in H2, the desirability of Primark’s core product ranges also managed to offset reduced demand for its seasonal collections.
"The rest of Europe saw reported L-F-L sales up 8%, which is a concern considering the region was 18% down on pre-pandemic levels last year. Primark opened 18 stores across the region in FY2022/23, with aggressive store expansion needed to help increase visibility and steal share from local players such as Kiabi and Pepco.
"Though Primark did not disclose L-F-L sales for the US, net sales increased by 24%, driven by the opening of eight new stores. Primark is on track to achieve its Target of having 60 stores in the US by 2026 but must remain aware of the difficulties of breaking into this competitive market, where Shein, Target and Walmart remain firmly established players.
Primark continues to focus on its digital strategy to aid growth. Since launching its improved non-transactional website across all markets in FY2022/23, it has recorded a strong reception, with 15-20% of web sessions now utilising the stock checker tool. It has also seen pleasing results from its click-and-collect trial in the UK, which is available across 57 stores for womenswear and childrenswear.
"However, it must now be decisive in its rollout of the service across more products and markets to keep up with growing demand for omnichannel shopping, as, despite this enhancement in its digital proposition, Primark still lags behind competitors that offer more convenient online services.
