Primark looks at Zavvi's prime London sites as sales soar again
Friday 16 January 2009
Primark, the value fashion giant, is considering buying two of London's best-known stores from the collapsed entertainment retailer Zavvi, after delivering buoyant Christmas sales that left many rivals trailing in its wake.
The retailer, which is owned by Associated British Foods, refused to comment on the stores, but it is understood to be eyeing Zavvi's outlets on Piccadilly Circus and the one at the opposite end of Oxford Street to Primark's flagship.
A potential West End store deal could be significant because, if it purchased Zavvi's store close to Tottenham Court Road Tube station, it would give a major boost to that end of Oxford Street, which is widely recognised to be grubby.
The administrator to Zavvi, Ernst & Young, closed the Piccadilly Circus store this week, but the Tottenham Court Road outlet continues to trade.
The massive Piccadilly site was formerly owned by a US company, Tower Records. It was taken over by Virgin and sold to Zavvi in September 2007.
Primark's existing Oxford Street flagship, which opened in April 2007, is massively overtraded and takes more than £2m a week. The retailer is also thought to be interested in other Zavvi stores but, contrary to speculation, Primark has little interest in Woolworths' stores, which are generally too small at between 10,000 and 20,000 square feet.
ABF, the grocery-to-sugar conglomerate, said Christmas trading at Primark was "strong" and "ahead of our expectations". For the 16 weeks to 3 January, the retailer's total sales rose by 18 per cent, driven by increased selling space and "very good" like-for-like growth. While Primark did not provide an actual like-for-like figure, analysts at Citi said it was around 5 per cent.
For the 13 weeks to 27 December, rival Marks & Spencer delivered like-for-like sales down by 8.9 per cent for its clothing-dominated general merchandise business. Next, the UK's second-biggest clothing retailer after M&S, posted underlying sales down by 7 per cent for 29 July to 24 December.
Primark's buoyant trading update has been matched by rival value fashion retailers New Look and Peacocks over Christmas, reinforcing the view that customers are trading down and seeking value for money.
John Bason, ABF's finance director, said: "We had strong trading from Primark over the four months since our financial year end and the Christmas period was against deep discounting on the high street."
He added that Primark did some discounting over Christmas, as it does over the course of the year to shift slower-selling stock, but added: "It was not to get sales going."
Primark operates 187 stores in the UK, Republic of Ireland, Spain and the Netherlands. Mr Bason said it plans to open three more stores in the UK before the end of September, but would only confirm Edinburgh and Cambridge.
ABF, whose brands include Twinings Ovaltine, Ryvita and Jordans, delivered group revenue up 15 per cent at constant exchange rates, which was in line with expectations.
Ethical trading: Primark 'concerned'
Primark's strong results come just days after another exposé of the retailer's suppliers' allegedly unethical practices.
The BBC this week revealed that workers at a Manchester-based garment firm supplying clothes to Primark were earning less than the minimum wage in terrible conditions. It reminded viewers of a previous BBC documentary which had criticised Primark – which is owned by Associated British Foods – for practices at suppliers in Bangladesh.
Following this week's BBC report, Primark issued a statement saying that the "apparent practices" shown were a matter of "great concern". The value fashion giant is fully co-operating with the authorities, understood to include the UK Border Agency, HM Revenue and Customs, and the Health and Safety Executive. John Bason, ABF's finance director said: "We have good policies in place to ensure that we have good integrity in the supply chain, and where we find there are breaches in that we take it very seriously." Allana McAspurn, the general UK manager of Made-By, an organisation that works with fashion brands on their environmental and social sustainability, said: "People often assume that because factories are within the EU standards are being met, and this is not always the case."
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