Primark’s owner Associated British Foods released results for the year to 13 September on Tuesday and also hinted that Primark might one day be operated as a separate business.

More of that later. First, those results. ABF group revenue was down 3% at £19.459 billion and pre-tax profit fell 26% to £1.413 billion. ABF ha in September already flagged its sales figures but let’s look at the Primark numbers in detail. In its Retail division (that is, Primark), sales grew 1% at constant currency and were “in line” on a reported basis at £9.5 billion.

Adjusted operating profit increased 2% to £1.126 billion and the adjusted operating profit margin was 11.9%, up from 11.7% a year earlier. 

It said it saw “good execution of store rollouts in Europe and the US [that] contributed 4% to sales growth”. And UK like-for-like sales improved in the second half as it renewed its focus on Primark’s value proposition and product offer. But in Europe, a strong first half was followed by weaker trading in the second half.

What that means in numbers is that the 1% increase at Primark for the year as a whole also translated into +1% in both the first half and the second half. But on a like-for-like basis sales for the year were down 2.3%, with a 2.5% first half drop and a 2% drop in H2.

For the UK and Ireland, which account for 45% of its total sales, sales were down 1% in the year. They’d actually fallen 4% in the first half but increased 1% in the second half. That was clearly boosted by additional selling space as on a like-for-like basis overall sales for the year in the region were down 3.1%. They’d fallen 6% in the first half but only 0.4% in the second half.

While sales declined, Primark increased its UK market share to 6.8%. The lower H1 sales reflected a decline in the UK clothing retail market and particularly weak shopping activity within elements of Primark’s customer base. There was a good sequential improvement in H2 trading in response to its stronger product offer, particularly in womenswear, and increased digital engagement, supported by more favourable market conditions.

For the rest of Europe total sales rose 2% with a 5% rise in the first half but a 1% fall in H2. On a like-for-like basis European sales fell 1.5%, with a 1.1% first-half increase and a 3.7% drop in the second half. Those sales account for 49% of its total.

The like-for-like sales decline 1.5% was partly accounted for by the impact of new store openings. In Spain and Portugal, Primark had strong underlying sales growth in H1 and while growth slowed in H2, it continued to outperform a weak Spanish clothing market. In France and Italy, sales were flat, reflecting both challenging market conditions and competitor intensity. Growth in its newer markets in Central and Eastern Europe was driven by new store openings. In its Northern European markets, sales declined slightly, mainly due to lower sales in Germany in H2. The recent restructuring of its store footprint in Germany and the Netherlands drove “much-improved sales densities and profitability”.

In its smaller American market (the region accounts for 6% of its total) the numbers were all positive. Sales rose 20% for the year with a 17% rise in H1 and +23% in H2.

The US sales jump came as it made good progress with its space expansion programme, opening six new stores, including its first in Texas and Tennessee. It now has 33 stores there with an additional 18 leases signed. 

Upbeat on profits and growth

ABF said the adjusted operating profit profit rise demonstrated “the strength of Primark’s operating model and focused cost optimisation. Gross margin improved due to favourable foreign exchange, supplier efficiencies and effective markdown management”. 

And the company said it has “significant white space in our growth markets in Europe and the US and in new franchise markets, and we are targeting new store rollouts to contribute around 4% to 5% per annum to Primark’s total sales growth for the foreseeable future. This year we signed our first franchise agreement with the Alshaya Group to enter the Gulf markets and made good progress towards the first store openings”.

As for that hint of a separation of Primark from the main group, it said the board “has been conducting a review of the group structure with a view to maximising long-term value. Although no decision has been taken, the outcome of this review may lead to the board deciding to undertake a separation of the Primark and Food businesses”.

The review is being conducted in consultation with ABF’s largest shareholder, Wittington Investments, “which remains committed to maintaining majority ownership of both businesses… The board will provide an update on the review as soon as practicable”. 

So no news yet, but watch this space.