Irish clothing discounter Primark promises not to raise its prices next financial year, even if it will cut deeply in profits and margins. Preserving the price image is more important, the budget retailer argues.
Safeguard positioning at all costs
In its next financial year, which starts on 18 September, Primark will not increase prices any further, the fashion retailer promises on the eve of the announcement of its annual results. However, the already announced and planned price increases will continue. Primark’s core proposition is and remains affordability and price leadership, so it is in the chain’s own interest to safeguard that positioning, the reasoning goes – regardless of what it may cost in the current context of energy crisis and hyperinflation.
For the Irish chain as well, the past year has been one of recovery from the Covid-19 pandemic. At constant exchange rates, Primark expects a 40 % increase in sales compared to a year earlier, with sales expected to reach 7.7 billion pounds (just under 9 billion euros). Consumer behaviour is returning to more normal, especially in the United Kingdom. Fourth quarter sales in continental Europe, however, were weaker than expected (+ 5 %).
The company is already counting on lower margins: the operating profit margin is expected to be 9.6 % in the previous financial year, but may be lower next year. Primark is targeting a 7.2 % profit margin, particularly as it freezes prices and consumers continue to lose purchasing power. Nevertheless, in the run up to Christmas, Primark expects to launch “click and collect” in the UK, a first step towards e-commerce for the chain.