- Primark to launch click and collect trial
- Retailer’s sales recovery continues
- ABF expects to deliver ‘significant progress’ in annual profits
Discount clothing retailer Primark’s sales continue to recover from the pandemic and the cut-price fashion chain is to launch a click and collect trial on children’s products as it finally goes all-in on online shopping.
The news helped lift shares in Primark’s lately-unloved parent company Associated British Foods (ABF) by 0.8% to £16.21.
The diversified groceries-to-fashion conglomerate also left its full-year outlook unchanged following an in-line third quarter performance, with management confident of delivering ‘significant progress’ expected in adjusted operating profit and earnings per share.
USEFUL HALFWAY HOUSE
Value-focused fashion retailer Primark has long been a high street outlier for having no online transactional services, arguing that the economics of online deliveries and returns wouldn’t stack up for its cut-price fashion and accessories.
Primark has also relied on lots of impulse purchases in store which might be difficult to replicate online.
This makes the news Primark is to launch a UK trial click and collect service towards the end of the calendar year, one management hopes will drive higher footfall and incremental sales in store, all the more significant.
Russ Mould, investment director at AJ Bell, explained click and collect could be ‘a useful halfway house’ for Primark.
‘It means people can shop at their convenience at home but will still come through the doors of a Primark to collect their purchase and potentially make some incremental buys along the way.
‘Like all value-based consumer facing propositions, Primark faces the challenge of dealing with mounting costs while not losing its credentials on affordability with customers. Its scale is helping in terms of tackling this challenge and assuming it can sustain this, the brand could enjoy market share gains as shoppers trade down,’ added Mould.
Primark has chosen a ‘much expanded’ children’s products range for the trial which will take place in up to 25 stores in England’s north west.
The retailer said the trial ‘will enable us to provide more fashion, licence and lifestyle products to more customers and more often’.
PRIMARK SALES REBOUND
All Primark’s stores were open during the third quarter to 28 May 2022, unlike the comparable quarter last year when the shutters were pulled down on the majority of stores until the middle of April.
As a consequence, sales in the quarter were 81% ahead of last year at almost £1.73 billion and 4% higher than the comparable pre-covid period three years ago, boosted by better weather across all Primark’s markets as well as the return of tourism and more office working.
Associated British Foods added that Primark’s like-for-like sales have been improving since the half year and for the quarter were 9% below pre-covid levels three years ago.
Despite having to absorb rising costs, Primark remains on track to deliver a full-year adjusted operating profit margin of some 10%.
GROUP SALES UP 32%
Associated British Foods’ group revenue rose by 32% to a shade over £4 billion in the third quarter, boosted by 10% sales growth in its food businesses which reflected price increases to recover input cost inflation as well as tasty volume increases in its ingredients division.
AJ Bell’s Mould said another thing which makes Associated British Foods stand out is its conglomerate structure.
Having a diversified business has ‘served it well during the pandemic and through reopening as the importance of its food, ingredients and grocery business has come to the fore.
‘This is particularly the case at present thanks to the disruption to global food supplies caused by the war in Ukraine.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
