Retail isn’t dying – it’s changing: Primark results show growing shift away from city-centres
Primark carved out an interesting piece of the property news cycle this week, stating on Monday that its adjusted operating profit is now expected to be at least at the top end of the previously advised £300-350m range. Its sales surge since reopening its stores has been impressive, raising the question of how a retail business, which was forced to shutter its entire store estate during the height of lockdown, without an online trading platform to fall back on, has managed to significantly outperform predictions. BBC’s Wake up To Money on Tuesday went some way to answering this with an interesting discussion focussed on Primark’s unique value-for-money proposition, homeware offering and low-cost word-of-mouth marketing.
Significant to the current property sector mosaic is that, while Primark’s overall sales figures look relatively promising, they show that performance at its new supersize store in Birmingham, its two flagships on Oxford Street and one in Manchester, has been lagging. Primark said full-year sales in the UK since reopening are expected to be 12 per cent lower on a like-for-like basis. Take these four large UK stores out of the equation, and this figure drops to only 5 per cent, shedding light on a wider story about the shift away from city centre destinations as a result of Covid-19.
Primark reported that sales at its stores in edge-of-town retail parks are higher than last year. In fact, retail parks have become the clear winner among retail destinations in ‘Covid World’ since lockdown restrictions were lifted. According to the British Retail Consortium-Shoppertrak footfall monitor, high streets struggled the most in August, with footfall down 42%, while in shopping centres, traffic declined 37%. In retail parks, however, footfall decline was tempered at 11%. (BRC, quoted in Morning Star). We are now operating in a retail industry where driving footfall is equally, if not more important than driving average transaction value increase. As Covid-19 continues to disrupt normalcy nationwide, there appears to be two key elements at play that are shaping retail performance across the board; a lack of office workers as more and more people work from home, and a nervousness about getting on public transport to shop in city centres.
Retail Parks, unlike city-centre stores, generally offer much larger, more spacious formats and, being out of town, present the ability for shoppers to safely use their own transport. Exemplifying the investment appetite for retail parks, this week we also saw European property investor, M7 Real Estate acquire a portfolio of six UK retail parks for £157 million with CEO Richard Croft stating that retail parks have the additional benefit of being divided in half between warehousing and physical stores, offering a click and collect element.
As Croft aptly put it “I don’t think retail is dying. Retail is changing”, and retail parks, as well as local shopping centres and accessible high street stores, look to be at the forefront of that change.
Andrew Smith, Account Manager, InnescoGo back to category