Primark highlights role of digital offering as sales improve

Primark has reported strong sales growth for its full financial year, crediting its investment in its nascent online offer in helping mitigate the impact of high street retail challenges.

Parent company Associated British Foods said the retail’s brand’s sales increased 11% year-on-year in the 12 months to 17 September.

Speaking during presentation of the results to analysts, CEO George Weston said consumers were responding positively to its revamped digital offering. The company has been investing in bringing its website and digital services, which have been developed at a slower pace than rivals, and Weston believes it will be “as good as anyone’s I think, by the time we’re done”.

Over the past few years Primark has been investing in expanding its online shopping offer to “transform” its digital presence, with a limited roll-out of click-and-collect in stores and a revamped “enhanced” website. The company has now rolled out its enhanced website over all 16 territories in which it operates. That is “undoubtedly driving sales, as it was always intended to”, Weston said, but also noted that digital performance is driven by far more than simply a refreshed website.

He stated that the refresh was more wide-ranging, about “driving traffic to our website through organic search”, about selected performance marketing trials – from which he says the company has seen “good results”.

The company is continuing to take a test-and-learn approach to investment in some of its digital capabilities. Weston said “we’re still to decide whether click-and-collect is a commercial opportunity for us or not”, though he states the experiment is “going well so far”.

In September the retailer noted that click-and-collect had delivered incremental sales growth across its range of childrenswear, and planned to expand the service to womens’ clothing lines across 2023 and beyond. There was no further mention in the results of any movement towards home delivery: while many of its fashion retailer rivals have historically made home delivery a key part of their offering, many are now limiting the extent to which they offer free returns.

Given that Primark operates on narrower margins, questions will remain whether it will experiment with home delivery any further.

Primark expands online shopping offer as part of plan to ‘transform’ digital presence

Weston also noted that high street performance across the brand remained solid once mitigating factors like weather were stripped away. He said: “Shoppers are coming back to high streets in Europe just as they are in the UK. We saw some interesting survey results the other day about people’s intentions about shopping in the run up to Christmas. 44% of people said that they would shop more on high streets than online this year.”

To that end Primark said the process of installing self-checkout technology would continue, from the 22 stores that currently have that option for consumers to more of the 192 UK-based stores. Weston also notes that he has “very little doubt” that the company’s retail footprint would continue to expand across Europe and the US.

Weston attributed some of Primark’s success to its social media activity, particularly around partnerships. He cited the brand’s collaboration with singer and actress Rita Ora, stating it was an authentic approach to highlighting its range: “She’s also very, very authentically a Primark shopper. She grew up next to Hammersmith store, which used to be our flagship in the old days when she was young. And she said very, very openly that that’s where a lot of her fashion experimentation started.”

Expanded ranges

Weston noted that “I don’t want you to think we’re running away from failure elsewhere” when discussing the brand’s expanded range of lines. He stated that the brands being expanded are “extra” to the core lines, which continue to perform well.

Of its premium essentials range The Edit, he stated that “we’re increasing the number of items in the range, the number of stores that carry it and we’re seeing how the online trial goes with Edit’s products.”

He stated that Primark was seeing success in the sales around its licensed clothing. Primark typically carries clothing ranges bearing licensed designs and IPs, and Weston noted that this has been a big part of the appeal to consumers over the full year. He noted that with the partnership with Barbie which saw Barbie-branded apparel sold via Primark, “we ordered far more stock than we thought was wise, and wish we’d ordered three times as much”. He stated that the range was resold on eBay for up to five times what Primark was selling it for, and “we felt slightly sore about that”.

He also cited the range of women’s essentials, for which “we are getting well known” for driving a lot of consideration among fashion shoppers”. Overall Weston believes that the brand remains “very attractive” not just to existing customers but also to new customers “engaged by our digital platform, new store openings, and word of mouth which remains as powerful as ever”.

Primark expands click-and-collect trial as footfall rises

Overall Weston also noted that retail margins were impacted by higher costs, which the brand decided not to pass along to consumers – which he said he is sure was “the right thing to do”. The margin was down from 9.8% the year before to 8.2% in the first half due to higher costs of bought-in goods, freight rates, labour rates and energy costs in particular. He said that while some of those costs are falling or liable to fall in the near future, some costs will stick.

2024 and beyond

The company states that, heading into 2024 “at this early stage we believe that the adjusted operating profit margin will be above 10% with further improvement dependent on levels of consumer demand”.

Weston singled out labour costs as an example of a cost that will not reduce: “we’ve increased wages in this country; shop wages by 24% over two years”. He also noted that while labour disputes in supplier markets like Bangladesh “never last very long”, they did impact manufacturing costs during 2023. While that was compensated for by “strong” supply chains in China, Weston noted that disruption in supply chain and the resulting uncertainty “led us to the stock higher stock levels than we might have wanted last year”.

Overall group revenue stood at £19.8m, up 16% on the previous year.

Despite that, Weston stated that the forecast for 2024 is positive for Primark in particular: “In Primark we’ll see sales growth… modest like-for-like growth is in our forecast”, which he said was underpinned by its value offer in addition to the expansion of its digital program and limited pricing increased in the first half of the year.

While the first section of its digital refresh – the website rollout – has been completed, Primark is set to continuing investing in bringing its online and ecommerce capabilities in line with consumer expectations.