Primark cuts sales forecast on weak UK performance
By Frank Prenesti
Date: Thursday 23 Jan 2025
(Sharecast News) - Clothing retailer Primark cut its sale growth target to low-single digits in fiscal 2025 after warmer autumn weather and cautious consumers dented UK revenues in the 16 weeks to January 4.
In the UK, sales declined 4% during the period, with like-for-like sales down 6.4%. The company, owned by Associated British Foods, in November guided for annual growth in the mid-single digits.
Adjusted operating profit margin was forecast to remain broadly in line with last year's level, as gross margins continued to improve and good cost management offset inflation and the step-up in investment.
The performance reflected a weak October and November followed by stronger sales and like-for-like growth in December over the key Christmas trading weeks, AB Foods said in a trading statement on Thursday.
"Trading activity within elements of our shopper base was weak as a result of cautious consumer sentiment and a lack of seasonal purchasing catalyst given the mild autumn weather," it added. Primark generates about 45% of its sales in the UK and Ireland.
"Despite the market conditions in the UK and Ireland, we remain confident in the Primark proposition and continue to focus on initiatives across product, digital and brand to drive underlying growth."
Seasonal womenswear, such as coats, knitwear and boots saw lower sales during unseasonal weather during October and November, Strong trading over Christmas failed to offset the impact. Primark also admitted it lost market share to rivals with bigger online operations, given it only has a 'click and collect' service.
ABF said total sales over the period had risen 2%, lower than forecasts, and it expected annual sales to rise by no more than 3% against prior estimates of 5%.
Mainland Europe and the US are expected to continue to outperform the UK and Ireland. Sales rose 9% in Spain and Portugal, 5% in France and Italy, and 17% in the US as Primark opened new stores.
The conglomerate, which also runs a foods and sugar division, said its grocery business also struggled in the UK as bakery sales fell back after Tesco removed some of the group's products. Overall grocery sales rose by just 1%, led by strong sales of Twinings and Ovaltine, particularly overseas.
Hargreaves Lansdown analyst Aarin Chiekrie noted that the sugar division "has come back down to earth" after a bumper period, with sales expected to continue falling this year as an oversupply in the market pushes down European prices.
"It's likely to be 2026 before investors see much improvement here. Luckily, ABF is home to a host of other businesses too. In the grocery unit, the group makes customer-favourites like Kingsmill bread, Ryvita, Ovaltine, Twinings Tea and many more," he said.
"Growth here and across its Ingredients division was able to pick up the slack and keep group revenue heading in the right direction. The short-term picture at ABF is likely to remain choppy, but with growth opportunities and an undemanding valuation, this could mark an attractive entry point for potential investors."
Reporting by Frank Prenesti for Sharecast.com
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