Primark and Gap show diverging fortunes on UK high street

Primark and JD Sports have reported strong demand for their clothes, hours after US retailer Gap revealed plans to close all of its UK stores, highlighting the divergence on the high street in the wake of the pandemic.

Associated British Foods, Primark’s parent company, on Thursday said sales have risen above pre-pandemic levels as lockdown restrictions lift and people rush to refill their wardrobes with clothes for social occasions.

JD Sports, which has made a string of acquisitions during the pandemic, raised its full-year profit guidance to at least £550m on the back of “enhanced levels of consumer demand”.

The bullish announcements from the two British companies came hours after US retailer Gap announced it would close all of its 81 stores in the UK and Ireland and remain only available online in the countries, putting roughly 1,000 jobs at risk.

Primark said sales of £1.6bn in the quarter ending June were up 207 per cent from the same period last year, when the first lockdowns forced the chain to close all of its stores, and were 3 per cent above the same quarter two years ago before the pandemic.

The fast-fashion company added that it had gained UK market share during the pandemic, something that was likely helped by the disappearance of several brands from the high street during the pandemic, including Karen Millen and Arcadia’s Topshop.

Shares in Primark owner ABF rose more than 5 per cent in morning trade, while JD Sports was up more than 3 per cent.

“A tale of two very different retailers has unfolded with Gap closing UK shops for good to go online only, while . . . Primark seems even more unlikely to reverse its decision not to launch a digital sales platform,” said Susannah Streeter, analyst at Hargreaves Lansdown.

“Primark may look increasingly like . . . a bricks and mortar island fighting off an encroaching online tide, but it has shown that with a strong social media presence it can still entice queues of shoppers through its doors,” she added.

John Bason, finance director at ABF, told the Financial Times, that several high-street brands that had attempted ecommerce and failed had not managed to differentiate themselves enough from rivals. Primark has refused to sell online and instead is focused on its 396 stores.

“If moving from bricks-and-mortar to online . . . people will go where it’s easier [to shop] and where there’s a better service,” he said, adding that many brands had not managed to “offer consumers something to keep them”.

Sales of leisurewear had started to abate with the end of the most recent lockdown, Primark said, stating that there was a resurgence in “demand for fashion across womenswear and menswear”.

Primark said the retail market remained volatile and that demand varied across the countries it operated in, including Italy and Poland, depending on the level of coronavirus restrictions.

It said, however, that the “relevance and appeal of our value-for-money offering has been evidenced by the number of customers that have returned to shop in person in our stores”.

H&M, world’s second-largest fashion retailer, said on Thursday, however, that it would close 250 stores globally, citing the growing popularity of online shopping.