Primark has pledged to ramp up spending on lowering prices, promising shoppers the biggest price cuts for at least a decade. The fashion chain's bosses said it was pumping a "very significant" amount into returning the business to its budget roots, while also confirming a date for the launch of home deliveries.
The retailer said home deliveries will not begin until December next year. The announcement came as Primark revealed its annual profits fell sharply last year, with sales growth driven by new store openings rather than existing branches.
Sales and Profit Performance
Results from owner Associated British Foods showed Primark's sales edged up 2% to £9.8 billion globally in the year to mid-September. However, the rise was driven by opening new stores, with takings in branches open at least a year down 2.6%.
Primark's UK sales, which account for almost 40% of its worldwide trade, went from growth of 1.3% in the first six months of the year to a 0.2% decline in the second half. The chain blamed the long hot summer, with a limit to how many T-shirts and shorts shoppers could buy, and the delayed arrival of cold autumnal weather.
Primark's annual profits tumbled 10% to just over £1 billion as a result.
Return to Budget Roots
George Weston, boss of ABF, explained the markdown pressure: "The markdown percentage was significantly higher this year because that warm autumn last year left us with too many cold weather garment, coats in particular, that we were selling at 70% off through January and February, just to clear them. It is almost as high as I have seen it."
Mr Weston said the chain had already begun reducing prices and was set to ramp that up in the year ahead. "There is unashamedly investment back in price," he told the Mirror. "We are returning to what Primark has been at its best, which is unbeatable value, quite simple. We are doubling back down on it."
He added: "Shoppers really are noticing. Where we cut the price of, for example, boyfriend pyjamas, from £15 to £13, we have seen a significant increase in sales. The price investment is right in the centre of what we are famous for. It is not peripheral. It is very significant. It's certainly the largest investment in price in the last 10 years."
Home Delivery Launch Date
Primark confirmed in September that it finally planned to begin taking online orders, having resisted for years on the basis that it was not cost effective while rivals grew their internet arms rapidly. Mr Weston now confirmed: "By December next year, we will have it up and running. As we currently think, it will be with all categories."
The expected launch date would coincide with both the busy Christmas period and plans to split Primark from the rest of ABF as a separate company listed on the stock market. The rest of ABF's sprawling business extends from sugar production to making Twinings tea.
Mr Weston warned higher costs, including from fuel, would mean those being passed on in the form of prices. ABF group-wide revenues rose 1% to almost £19.6 billion, but profits slumped 14% to £1.45 billion.
