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Has Primark Gone ex Growth ?

Associated British Foods, ABF, owners of Primark have been reduced to claiming that Primark has been impacted by currency rates.  Amazing how when things start to go wrong currency rates is the directors first choice as to where to lay the blame. The fact that in the previous years of heady growth, currency rates never got a mention as being in any way responsible for the success – allegedly superb management alone was responsible then.

Now management has also had to admit that its decisions to open new stores in Germany and the Netherlands impacted its existing outlets and caused a fall in sales in those outlets.

Like for like sales in the past 16 weeks have only been in line with those of last year and continue to be held back by the effect of those new stores in the Netherlands and Germany. The UK it claims delivered a positive like for like performance but the details as to how positive, are not mentioned. Primark usually trumpets its growth figures in every announcement. Why has UK growth now become a closely guarded secret ?

As for currency problems, Primark sources most of its products in dollars and the strength of the dollar has impacted margins. It claims that it is now taking action to remedy this.

Over the first 40 weeks to date, total sales rose by 13% on a constant currency basis or by 9% on an actual currency basis due to the weakness of the Euro. Selling space in that period however, increased by 8%.

No doubt all will be revealed at the year end but flat like for like sales over a 4 month period, may not bode well. Let us hope that management does not have to delve even deeper into the excuses drawer.

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