Penneys and its sister brand Primark have “great growth plans” and there is a “viable future for bricks and mortar” retailing in spite of the major switch by consumers to online shopping, its chief financial officer has said.
Speaking at the EY Entrepreneur of the Year CEO retreat in Killarney on Thursday, Primark’s chief financial officer David Paterson said the key for the Irish retailer was “making sure you’ve got a product that customers really want to buy. If the product is wrong then you’ve got no business.”
Mr Paterson said Penneys and Primark were focused on not passing on current “cost headwinds” around labour and supply chain issues that have emerged across all industry sectors during Covid.
“At the heart of Primark and Penneys is that cost leadership. So yes we’ll face some cost challenges, like we do every year, but we have a good track record of mitigating that, protecting the margin and most importantly protecting that price leadership position for customers.”
Penneys/Primark was forced to close its stores on three separate occasions since March 2020 due to Covid-19 lockdown restrictions, yet still managed to open 25 new outlets since that date. Long queues formed outside many of its flagship stores around the world in advance of reopenings.
“We were absolutely delighted with the queues... it was fantastic to see the attraction of the brand not only here in Ireland but in all the markets in which we operate.”
Mr Paterson said consumer trends driven by Covid were still evolving. “As we’ve reopened, we’ve seen retail parks do much better than they would have done pre-Covid. You can drive into a retail park, get out of the car and walk into the shop and then get back into the car. So it’s probably a safer environment for those consumers who are more nervous about getting back out.
“Whereas our city centre destination stores... which are really important stores for us, such as our Mary Street [store] in Dublin, we have two stores on Oxford Street in London, they haven’t recovered at the same pace. There’s a lack of commuters, a lack of tourists.
“Weekends were always the biggest shopping days of the week. We haven’t seen the recovery on Saturdays and Sundays that we have on Mondays, Tuesdays and Wednesdays. We’re all getting to grips with the new hybrid way of working.
“In terms of what they were buying, clearly during Covid people weren’t going out to bars, restaurants and on holidays. They were buying pyjamas. I’m astounded by how many sets of pyjamas we sold in Ireland. People were buying stuff to just lounge around the house. We are seeing now... a pick up in formal wear but we are still learning around those consumer behaviours.”
Primark currently has 399 stores in 14 countries, with its 400th slated for Sicily in the coming months. It operates as Penneys in Ireland and as Primark in other markets.
In a trading update last month, its parent group, Associated British Foods (ABF), noted that Primark’s sales in the second half of its financial year are expected to be £3.4 billion (€4 billion), while its operating profit margin in the period will be more than 10 per cent. ABF will publish its full-year results on November 9th.