viewAssociated British Foods PLC

Primark on track to overtake Next as UK’s second-largest clothes retailer by end of year

First-placed Marks and Spencer will be looking over its shoulder very soon as well

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Primark’s expansion, both in the UK and abroad, is showing little sign of slowing down

Associated British Food PLC’s (LON:ABF) Primark fashion chain is set to overtake Next PLC (LON:NXT) and become the UK’s second-largest clothes retailer before 2018 is out.

Data group GlobalData estimates that Primark is on track to command a 6.8% share of the clothing market by the end of the year, ahead of Next which it forecasts will have a 6.7% share.

READ: Weston family to pocket £200mln dividend as AB Foods reports rise in profits

That would leave it behind only Marks and Spencer Group PLC (LON:MKS), which is forecast to be a little further up the road at almost 7.5%.

“Primark is showing the resilience that midmarket players and the likes of New Look can only dream of with the behemoth’s success down not only to price but to product, and in particular its impressive breadth and depth, with Primark equally top of mind for basics as it is for trend-led items,” said GlobalData’s senior retail analyst Kate Ormrod.

What high street problems?

The UK high street’s troubles have been well-documented, but Primark bucked the trend once again last year, posting a 5.3% rise in UK sales, and a 1.2% climb in like-for-likes – a key metric for retailers.

Including the 11 other countries it is now in, sales rose 5% to £7.48bn, although much of that was driven by the 1mln square feet of new retail space it opened up last year.

To give that figure some meaning, parent company AB Foods invested £434mln into Primark in the year just gone, predominantly on fitting out new and existing stores.

Like-for-like sales fell 2.1% though, with the retailer blaming “unseasonable weather in three distinct periods” in the Eurozone for the dip.

Sales and profits to grow this year (again)

Despite that drop-off, operating profits soared 13% to £843mln, with fewer markdowns than expected helping to boost its margin up to 11.3%.

The margin is expected to stay “broadly in line” for the year ahead which, when coupled with an expected rise in sales, should result in another jump in sales.

That expected growth is likely to be largely driven by new store openings once again, with Primark noting that its “selling space expansion will continue”.

One of the new stores will be a 160,000 square foot superstore in Birmingham – the largest Primark ever.

If that’s a sign of what’s to come, Marks and Spencer’s position at the top of the UK clothing table will come under threat sooner rather than later.

ABF shares were up 2.2% to 2,440p in early afternoon trading on Tuesday.

Quick facts: Associated British Foods PLC

Price: 2670 GBX

Market: LSE
Market Cap: £21.14 billion

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