Budget retailer Primark achieves 22% growth in sales in 2013

A rise in sales for budget clothing retailer Primark has boosted the profits of its owner Associated British Foods, the BBC reported today.

Primark’s revenue increased by 22%, to GBP4.27bn, for the year ending 14 September 2013. The fashion store’s like-for-like sales also rose by 5%, despite the economic turn down. In addition, the company’s operating profit accelerated by 44% to GBP514m. This was helped by the lower price of cotton and strength in summer trading, which meant there was less need for markdowns in the second half. These results are also said to be due to the company’s low pricing structure and its fast adoption of the latest fashion trends.

Associated British Foods, which also owns British Sugar and several food brands such as Kingsmill, Ryvita and Ovaltine, has reported a 13% rise in full year pre-tax profit to GBP1.1bn. The group’s total increased by 9% to GBP13.3bn.

During the year, Primark expanded in Europe with the opening of 15 new stores, four of which are in the UK and include a second store on Oxford Street in London. The fashion chain now has 257 stores in eight countries around the world. It reportedly plans to open another 13 stores by Christmas, including five in Spain and its first store in Marseille, France.

According to AB Foods, Primark had also made ‘significant progress’ with its ethical trade programme following the collapse of the Rana Plaza factory in Bangladesh in April this year, which killed more than 1,100 people. AB Foods has reportedly paid short-term financial support of six months’ salary to more than 3,600 people who worked in the building, irrespective of their employer. It added that Primark now has 40 in-country ethical trading specialists, including eight located in Bangladesh.

Primark exceeds expectations and plans expansion

Further Primark stores will continue to open, despite the retail giant seeing a dip in full-year profits.

However although the stores profits are thought to have fallen 8 per cent, like many of its competitors – it decided to absorb increases in costs.

The low-priced clothing store decided to absorb not only the increased rate of VAT , but also the almost doubling cotton prices.

Primark saw like for like sales increase 3 per cent – luring shoppers in by focusing on value and increasing promotions.

Despite tough times Primark’s chef executive, George Weston said there are ‘exciting’ opportunities to expand and open new outlets in all of the coutries where is trades, including Ireland, Spain, the Netherlands and Germany.

Over the past ten years Primark has doubled store numbers to 223, with 19 opening last year – 11 of these in the UK.

ABF (Associated British Foods) which also makes Twinings tea, Silver Spoon sugar and Kingsmill bread, said group profits were up 1 per cent to £920million as it benefited from higher margins in its sugar production arm.

The grocery division saw profits increase 9 per cent to £249million, driven by a strong performance from Twinings, which is the fastest growing tea brand in the United States.

Martin Deboo, an analyst at Investec, said ABF’s profits were better than the City expected, driven by a strong performance from its sugar division.

‘This reflects a difficult year by Primark’s standards, driven by margin pressure from weak consumer demand and rampant cotton prices.’

Shares rose 26p (2.3 per cent) to 1,138p after it said it expects further growth in the current year.