Primark’s owner has revealed an expansion of its burgeoning click-and-collect operation, while confirming that price increases at the retailer will help it grow annual profits by more than expected.
Associated British Foods (ABF) said strong trading from both its Primark retail arm and its food operations, such as Twinings, over the last quarter had driven the adjustment to its annual forecasts.
The company said it now expected adjusted operating profit for the year to 16 September to be “slightly better” than its previous expectation.
It had earlier forecast to be “moderately ahead” of 2021/22’s £1.4bn.
ABF expected annual sales growth at Primark to come in at 15%, with the bulk of that figure being put down to price rises rather than higher sales volumes.
It predicted that same store sales would be 9% higher on an annual basis.
Discount retailers have largely seen resilient trading during the cost of living crisis to date, given shoppers’ determination to keep non-essential spending to a minimum.
One exception has been Wilko, which is set to disappear from UK high streets with the loss of more than 12,000 jobs due to its struggles getting to grips with post-pandemic challenges.
What happened to Wilko?
For Primark, this included a shift towards digital sales after its store-only operation was hammered during the era of COVID lockdowns.
Its click-and-collect trial is being expanded to womenswear, the company confirmed, building on the London store and kids’ offerings, the latter revealed last week.
ABF, whose shares had risen 27% so far this year in advance of its trading update, saw its stock rise by a further 1% in early trading.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The group’s savvy model means that starting with bargain prices allows more room to pump up price tags before putting consumers off in this very tough economic climate.
“The cost of living crisis hasn’t stopped customers from flocking to new stores either, which is a direct contradiction of the fortunes of many other large physical retailers who are closing their doors – not opening new ones.
“For all this to be possible Primark has to have a laser-like focus on its ranges and make sure it’s offering precisely what people want – there is no room for wasted hanger space.”