Primark buoyed by strong summer

Primark bagsPrimark's UK business toasted a "particularly strong" summer of trading as the budget chain continues to defy the uncertain economic climate.

The retailer, which has 242 stores across Europe, is expected to see revenues rise by 17% over its current financial year, which ends on Saturday.
The figure - excluding currency movements - includes "buoyant" trading in continental Europe, even though much of the region is mired in a debt crisis.

Associated British Foods, which owns Primark as well as household brands Kingsmill, Ryvita and Twinings, said profits for the second half of the financial period should be "substantially ahead" of last year.

It said its grocery customers continued to seek value through promotions and price but warned that recently higher wheat prices meant margins at its Kingsmill bread division were likely to come under further pressure.

At Primark, AB Foods estimated that when excluding the addition of 19 new stores over the year sales will be 3% higher in the financial period, with the performance of recently opened shops also exceeding expectations.

The company will boost its presence on London's Oxford Street later this month with a new four-floor outlet. It will also have 28 outlets in Spain after opening five new stores in the debt-laden country this summer.

Primark has been the star performer within AB Foods over recent years as it has ridden the boom in demand for budget clothing on the high street.

Primark's margins benefited over the summer from lower costs linked to the material falling back in cotton prices at the turn of the year.

Shore Capital analyst Darren Shirley, who continues to forecast group profits of £970 million for this financial year, described Primark as "possibly the most potent retail format in the UK and increasingly Europe".

High Street casualties
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Primark buoyed by strong summer

Administrators sounded the death knell for Woolworths in December 2008, leading to store closures that left 27,000 people out of work. Since its collapse former Woolworths stores have become a blight in many town centres and more than 100 of the large stores still lay vacant in January 2012.

Loyal customers didn't have go without the family favourite store for long however as it reappeared online as in 2009, after Shop Direct Home Shopping bought out the Woolworths name.

The greetings cards specialist became the latest highstreet casualty in May with 8,000 jobs on the line when it was forced it into administration. Its biggest supplier, American Greetings, then bought Clintons out of administration and put the retailer through a rebrand including a new logo and complete in-store revamps.

Its contemporary format includes new fixtures and fittings and easier to navigate stores, and will be rolled out to all 400 UK stores at the cost of £16million. Bosses aim to bring the brand back to profit within two years.

Poor sales in the run up to Christmas was the final nail in the coffin for several struggling chains, including lingerie retailer La Senza, which went bust in January 2012 with 146 shops and 2,600 staff. Kuwaiti retailer Alshaya bought part of the business, which saved 60 shops and 1,000 staff.

La Senza has been struggling in a similar way to other specialist shops such as Game and Mothercare, which have been hit by cut-price competition at supermarkets and have no alternative products to help shoulder losses.

Stricken retailer Blacks Leisure, which employed 3,600 staff across 98 Blacks stores and 208 Millets stores, went into administration in Janurary 2012 after failing to find an outright buyer.

Soon after its stores were bought by sportswear firm JD Sports in pre-pack deal - an insolvency procedure which sees a company being sold immediately after it has entered administration – which saw most of Blacks' £36 million of debt wiped out.

Fashion chain Bonmarche, which was part of the Peacock Group, was sold in January when the group collapsed due to unsustainable debts, resulting in 1,400 job losses and 160 store closures. Private equity firm Sun European Partners bought 230 stores, which continue to trade with 2,400 staff.

Peacocks collapsed under a £740 million net debt mountain in January 2012 in the biggest retail failure since Woolworths. Despite being sold out of administration to Edinburgh Woollen Mill in a deal that saved 380 stores and 6,000 jobs, administrators from KPMG were forced to close 224 stores with immediate effect. This lead to 3,350 redundancies from stores and Peacocks head office in Cardiff.

The high street name continues trading as bosses work to stabilise the situation, yet a further blow was dealt this month with news that the firm's pension fund is in £15.8 million shortfall as a result of the collapse.

Game buckled under its £85m debt pile in March 2012 and was placed into administration after being unable to pay a £21m rent bill. Administrator PwC immediately closed 277 shops, with the loss of 2,000 jobs. Soon after, investment firm, OpCapita bought 333 Game stores, saving more than 3,000 jobs.

Game's demise followed a string of profit warnings and the failure of nervous suppliers, including leading names Electronic Arts and Nintendo, to go on providing the latest games, further damaging poor sales.


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