Penneys untroubled by Dealz threat

Discount clothing retailer Primark has said it remains pleased with its performance in Ireland where it trades as Penneys but has declined to comment on plans by the Dealz chain to branch into clothing, in direct competition, writes Geoff Percival.

Dealz, the Irish operation of UK discount store Poundland, plans to introduce its own in-store clothing line in direct competition to Penneys here and Primark in the UK.

A spokesperson for Primark/ Penneys said the company does not comment on competitors.

However, John Bason, finance director of Primark’s owner Associated British Foods (ABF) seemed unperturbed, saying: “We are very pleased with the development of the Penneys business in Ireland this year. It is the home of ABF’s fashion retail business, which has sales across all markets of some €8bn”.

Primark largely drove first-quarter revenue growth for ABF during the 16 weeks to January 6, the group’s latest trading update shows.

On a group basis ABF increased revenue 4% year-on-year. Its interests cover retail, sugar, ingredients and agriculture. Primark’s first- quarter sales rose 7% on a reported basis and by 9% at actual exchange rates.

However, despite still showing solid overall growth, the company’s sales growth slowed in the first quarter of its financial year; showing that even the most reliable fashion retailers aren’t immune to the rise of online shopping.

“Northern European markets were the toughest for us in October, particularly in Holland. Some markets were down double digits,” Bason said, citing unseasonably warm October weather.

Primark’s underwhelming sales surprised investors, who thought the chain’s rock-bottom prices would make it one of the winners of the holiday season.

"The report joins a raft of disappointing updates from fashion retailers such as H&M and Marks & Spencer, and raises questions over whether Primark should add an e-commerce presence to its network. Though Primark doesn’t sell online, it does take advantage of the web," Mr Bason said.

“In the UK we have a fantastic range of merchandise and we are using social media to engage with customers really well,” he said.

“The UK is on fire. Of the 20 largest retailers, our market-share growth has been the strongest over the last year,” Mr Bason added.

Despite difficult business in continental Europe, the retailer said its same-store sales growth and market-share gains in the UK were strong and sales in the US continued to make progress.

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