British / Irish Cheap Brand Primark Sold The Same Store For The First Time In 16 Years.

On Monday, the biggest news in the Chinese market is that Alipay will pay for individual users.

Despite its affiliates

In March, Tencent's WeChat fortune paid a fee that it would not charge Alipay, but the market had expected the Alibaba's business style. So this charging strategy seems not unexpected, and there is a rumor behind IPO's rumors.

However, looking at the world, the biggest news of the retail industry on Monday is probably the British / Irish cheap brand Primark / Penneys (hereinafter referred to as Primark).

Primark's parent company Associated British Foods PLC (ABF.L) (the ABF PLC) Ying Lian food group issued a preliminary performance update for fiscal year 2016 ending on September 17, 2016. The group said its retail brand Primark store sales will record a year-on-year decline of 2%. However, with the 9% additional sales area of the new store expansion, the actual sales can still grow by 9% at fixed exchange rate, while the growth rate is expected to increase by 11% according to the pound.

Excluding Monday's decline, ABF PLC is the best performing Apparel Group in the open market in the past five years, or even better than rival Inditex SA (ITX.MC) India India Textile Group, whose share price soared almost 190% times, and the Inditex SA Indo Textile Group's share price has increased by about 160% over the past five years.

The other two biggest competitors, H&M Hennes & Mauritz AB (HM-b.ST) Hayne Maurice group and Gap Inc. (NYSE:GPS), are increasing by less than 40%.

Despite the announcement of its interim results in February, ABF PLC said the Primark Primark recorded a decline in the same store in the medium term, but the industry still has confidence in the company. It believes that the economic downturn will lead to more consumption of Primark, helping to offset the weak sales decline in the second half of the fiscal year in the second half of fiscal year.

However, ABF PLC said that the unusual warm weather during the Christmas season last year and the cold weather in 3 and April have hampered sales of Primark, which also led to its first decline in the same store in 16 years.

After the financial crisis, the global economy continued to slump, and the consumption capacity of the mass consumer group was not restored. On the contrary, wealth moved closer to the rich and triggered deflation worldwide.

On this occasion, Primark has been conquering the masses of consumers with the slogan "Amazing fashion, Amazing prices" in the past five years. The price of the brand as low as 1 pounds is directly related to people's hearts.

It is by virtue of low price that Primark has gradually conquered Europe's main markets such as Germany, Spain, France, Italy and so on, and has also been gradually shining in the US market.

In fiscal year 2016,

22 new stores and 1 million 200 thousand square feet of new sales have been added, bringing the total number of stores to 1230 million square feet and 315 stores.

{page_break}

Because the price is very low, Primark is almost the only brand in the field of public clothing that has not set foot in the electricity supplier. The company found that the price base of the company is not enough to support the additional human, warehousing, logistics, freight and other expenses that the company needs to undertake in the field of electricity business after working with its British counterparts and ASOS PLC (ASC.L)

This phenomenon is unique in the apparel industry, showing the attractiveness of the Primark price to the mass consumers, and worthy of the world's most famous cheap brand value.

For the first time in the same store sales decline of Primark, Tang Xiaotang, founder of No Agency, the Research Institute of luxury goods and clothing retailing industry, said Primark is still the most successful retailer in the current mode, just like the TJX Companies Inc. (NYSE:TJX) in the US.

Tang Xiaotang said that in the economic downturn, the proportion of consumer spending on housing and food will rise, and consumption of clothing and cosmetics will be suppressed.

"When the economy is good, consumers will be desperate to buy, but when the economy is bad, consumers will find every reason to stop buying it," he said. For most consumers, the first task is basically "save money and keep it safe."

In addition to the global economy and consumer market, another negative factor of Primark is that the brand purchase business has been settled in US dollars. After the referendum in Britain, the US dollar increased sharply against the pound exchange rate and increased the group purchasing cost. However, ABF PLC said that this factor will be solved because the procurement contract will be renewed before the end of the year.

Although Primark sales in the same store are rare, Primark's expansion plan shows that the brand is still the brightest star in the apparel industry.

ABF PLC group said it plans to add 1 million 300 thousand square feet of sales area for the Primark year, starting from the 2017 fiscal year of September 18th, of which Germany plans to add 5, and Italy plans to add 2 to Florence and Brescia respectively, and plans to add 3 stores in the United States to increase the total number of stores to 8.

Primark has been well received since its entry into the US market in 2015. ABF PLC group said its reputation in the United States has been increasing, and even forced the Japanese Uniqlo Uniqlo UNIQLO to start its business nearby.

John Bason, chief financial officer of ABF PLC group, said that all 5 stores in the United States had registered sales growth, but declined to disclose sales figures.

In addition to the group,

And investors are also optimistic about Primark's future in the US.

Kate Ormrod, an analyst at Verdict Retail, a retail research firm, said in an interview with WSJ that more aggressive expansion requires Primark to seize the potential of the US market and drive growth through a huge sales area.

Hargreaves Lansdown analyst George Salmon said Primark's good performance in the US market will bring growth potential.

At ABF PLC's current price earnings ratio of 24 times, only 29 of the Inditex SA Indo Textile Group is higher than ABF PLC.

Taking into account the fact that ABF PLC group has poor profitability in grocery, sugar and agricultural businesses, Primark, if it is the main business that supports the group's earnings growth, will even have higher P / E ratio than Inditex SA.

Therefore, it can be said that Primark is still the most profitable brand in the industry.