Primark UK market share up but comp sales sag in Germany, Netherlands

It was a story of rising market share as usual in the UK for value chain Primark, even if margins may come under pressure from rising costs due to the weak pound. But like-for-like sales at the chain fell in the Christmas period in Germany and the Netherlands as a rapid programme of new openings has eaten into sales at existing shops, said owner Associated British Foods .

AB Foods said that on a constant currency basis sales at Primark were 11 percent higher in the 16 weeks to Jan. 7 compared to the previous year, as it opened more shop space.

On a comparable week basis, sales rose 12 percent, the same pace at which average retail selling space increased in the period, equating to flat like-for-like sales.

"The lack of return to like-for-like growth at Primark in Q1 will disappoint, even if largely linked to Europe self cannibalisation," said Jefferies analysts in a note.

Primark has been on a big expansion drive in continental Europe in recent years, putting pressure on rivals such as Sweden's Hennes & Mauritz. It now has 38 Dutch and German stores, out of a total of 328, but does not sell online.

AB Foods finance chief John Bason said the changes to trading patterns were not a cause for concern.

"Existing stores see a reduction of sales densities but from really high levels. It is a normalisation of sales densities," he told Reuters, noting that mothers with strollers could now access one Berlin store that had previously been too packed.

AB Foods has already opened 0.8 million square feet of the 1.3 million it plans for the financial year to September, with Bason saying more new stores were planned this year in the Netherlands, Spain, the United States, Belgium and Britain.

UK IS OK... FOR NOW

In Britain, Primark reported growing market share, despite falling shopper numbers on high streets due to e-commerce. Primark is active on social media but has no plans to sell its low-price clothes online as the logistics are too expensive.

Bason said sales of women's fashion have been weaker, echoing comments by Next Chief Executive Simon Wolfson, who believes Britons are spending less on clothes and instead using spare cash on holidays, eating out and events.

AB Foods reiterated that Primark's operating profit margin will fall during the year as it has pledged to keep prices low despite the weaker pound, which pushes up the cost of goods sourced in Asia in U.S. dollars.

AB Foods said foreign exchange hedging contracts were in place for most remaining purchases for the financial year, with Bason adding that Primark was having good negotiations with its suppliers, where productivity was increasing.

On a group basis, the company said its outlook for the year was unchanged, with the weak pound after Britain's vote to leave the European Union boosting the value of overseas sales.