Following today’s release of Primark Q3 YTD figures for 2019/20,
Pippa Stephens, Retail Analyst at GlobalData, a leading data and analytics company, comments:
‘‘Though Primark has severely suffered since the outbreak of COVID-19, as store closures and a lack of a transactional website forced it to suspend trading for nearly three months, its sales since reopening have been promising, with revenue in the UK and Ireland for the week ended 20 June ahead of the same week last year. However, the retailer now expects its full year operating profit for FY2019/20 to be only a third of last year’s, at £300-350m, as ongoing weak demand for fashion products and reduced store capacities will prevent it from regaining lost consumer spend. Since online penetration for clothing & footwear will remain strengthened in the long term as a result of the pandemic, Primark should rethink its bricks-and-mortar only strategy for the future, in order to mitigate the impact of reduced instore sales densities and capitalise on spend shifting online.
Following its stores reopening, Primark has experienced higher footfall than its value rivals like H&M and Matalan, with many of Primark’s UK locations boasting long queues as consumers have not been able to access its products since March. While its stringent safety measures, such as hand sanitiser stations and perspex screens at tills, will have given shoppers more confidence to visit its stores, city centre locations have struggled to attract shoppers due to a lack of tourism and fewer commuters. However, its locations in retail parks have seen the greatest uplift, aided by their plentiful parking and easy accessibility. Despite some of its new store openings being delayed due to COVID-19, five new locations opened during Q3, with five more planned by the end of the year, but Primark must time these carefully, ensuring that consumer demand has sufficiently rebounded in these areas so that the openings are financially viable.
While clothing & footwear is forecast to be the worst hit retail sector with UK spend forecast to decline by 31.4% in 2020, Primark’s value offer puts it in good stead to retain appeal among consumers as unemployment rates and economic uncertainty rise. Though its formalwear and accessories categories have been particularly weak, Primark has experienced encouraging demand for leisurewear and nightwear, as consumers have spent more time at home during lockdown, as well as childrenswear, which remains resilient due to a greater dependence on replacement purchases. As lockdown measures start to be lifted, consumers are likely to start seeking new clothing to wear for social events, so Primark must adapt its strategy accordingly by gradually incorporating fewer stay-at-home outfits into instore displays and social media posts to provide greater inspiration.”