AB Foods to invest in Primark’s digital strategy but online shop still not on the cards

0
15

Associated British Foods PLC (LSE:ABF) said it is going to launch an improved version of Primark’s website although it remains adamantly outside of the online shopping realm.


In fact, it stressed that the digital offering is “critical” in the marketing strategy, rather than the sales one.


READ: AB Foods upgrades profits as Primark spends less on labour costs


The fast-fashion retailer has refused to set up an e-commerce platform while its competitors have been betting all on online sales, even during the pandemic when shops were closed.


It argues it would not be able to maintain its uber-cheap prices once translated online.


This contrarian take has so far paid off as hordes of faithful customers flocked to the stores as soon as they reopened, although demand has weakened during the summer after various governments imposed restrictions amid fears of the Delta variant.


Like-for-like sales in the third quarter were 3% ahead of the same period two years ago, but the fourth quarter, which ends on 18 September, is expected to see a 17% drop.


As for the new website, the plan is to include even more items that can be found in-store, so customers can check what is available before leaving the house.


The FTSE 100 group is also investing in digital marketing to deliver more personalised content to online visitors.


According to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, the fact that Primark is on the hunt for talent to create a new digital capability “seems to be a big hint that online sales will be part of the retailer’s future”.


For some, an improved ‘online catalogue’ could end up proving counterproductive.


“Knowing if something is stocked in your local store or not is useful if you want to avoid a wasted trip into town, but equally it’s a lost opportunity for Primark to sell them something else. Just remember its success has been led by people visiting its stores, browsing the aisles and walking out with products they weren’t initially intending to buy,” noted AJ Bell investment director Russ Mould.


Although this piece of news has probably been well received by the market, investors were disappointed by a slower-than-expected sales recovery.


The pill was sweetened by a profit upgrade thanks to lower labour costs, as Primark has not been replacing staff after they retired or resigned.


“While weaker sales may disappoint some investors, our conversations with investors ahead of the event suggest stronger margins and positive comments over the impact of cost inflation may offset concerns,” analysts at UBS commented.


Shares shed 3% to 1,917.83p on Monday at noon.

LEAVE A REPLY

Please enter your comment!
Please enter your name here