History and Analysis of Primark Stores

Primark stores ltd is famous for the trading of high street quality clothes with simple designs and fabrics for all genders, ages and in various sizes to fashion conscious individuals for cheap prices. It was incorporated on 30 April 1948 and has its head quarters in Dublin, Ireland. The first store was opened in June 1969 and within a year 4 more stores were opened. Primark's story has been one of continuous success as they now have 215 stores across United Kingdom and six other countries. Primark has about 21,827 employees, and operate from over 6.0 million square feet of selling. It is also a subsidiary of Associated British Foods Plc (ABF). As retailers they have various competitors such as Next Plc, Newlook, TK maxx and many others. In assessing the financial situation of Primark it is required to look at its balance sheet, income statement and cash flow statement. Ratio analysis was carried out for Primark over a five year period in order to identify the trend and also two of its competitors (Next Plc and Newlook) to be able to know how primark is doing in the industry. Revenue and Profitability Primark's revenue has been increasing considerably over the five year's period. There was an increase in sales by 13.64% to £1743.01million in 2009, 18.13% to £1533.79million in 2008, 41.86% to £1298.4million in 2007 and 21.29% to £915.3million in 2006. Profit however increased by 78.77% in 2009 and 7.54% in 2006 and declined significantly in 2007 by 33.99 and 2008 by 55.07%. In 2009, Primark opened 5 new stores in different countries and thereby increasing profit and sales. The growth in Cost of sales and expenses exceeded that of sales hence a decline in profit. Interpretation of financial statements Ratios are essential in ascertaining the worth of a company. Ratios help in checking the performance of a company. This performance could be against past periods (Trend analysis), similar businesses and planned performance.

Profitability and return ratios

Primark's gross profit margin in decreased in 2009 by 0.20%, increased by 0.4% in 2008, decreased by 3.2% in 2007 and increased by 0.3% in 2006. 'It is a measure of profitability in buying (or producing) and selling goods before any other expenses are taken into account' (Mclaney, Atrill, 2005, pp215). A decline in these ratio shows that gross profit was lower when compared to the sales revenue. This also shows that the cost of sales was higher relative to the sales revenue in 2009 and 2007, than in 2008 and 2006. Next and Newlook had higher margins when compared to primark and continuous growth from 2005 to 2009 except the slight decline in 2008 for next and 2007 for newlook.

This is an effective business analysis model used in executing any company's internal and external analysis. Internal analysis considers the strengths and weaknesses of the company while external analysis considers the opportunities and threats faced by an organization.

The organization structure of primark is simple and orderly. Primark provides high street quality clothes for all ages, gender and sizes for cheap prices and this is beneficial because their competitors (Next and Newlook) prices are not as cheap therefore greater number of customers in primark. They have been around for awhile (over 41 years) and have been a key player in the retail business and this gives the competitive advantage. They implemented the ethical trading policy which focuses on respect for workers, that is, improving the working lives of people across the globe that is within the supply chain. Next and Newlook are also implement the ethical trade policy. Primark has won several awards. Some of which are the prestigious retail week award 2010 for outstanding contribution to retail, 'Multi Market Retailer of the Year' - Oracle World Retail Awards , Best Outfit for under £50 Award - Fabulous High Street Awards 2010 and many others. During the recession Primark sales still increased by 41.86% while Newlook where majorly affected. 'Primark continued to thrive in the recession, with sales at the discount clothing chain up by 21% since last September'. (Wearden, guardian). New look planned to get listed on the London stock exchange. 'The chain aims to expand to compete with other budget rivals such as Primark. It will also use the proceeds to pay down debt' (Dailymail). Next's turnover increased by 0.97% during the recession and this was because a major supplier was also affected by the recession. 

Primark relies on customers to talk about their product since they have no form of advertisement. Competitors such as newlook and next rely on advertisement which is an advantage for them. Primark stores are usually crowded because the prices are cheap. The return process and payment for sales tend to be slow due to large number of customers. Unlike Next and newlook the customer service is faster as the queue is usually not as long as that of primark's. Primark does not fully comply with rules governing working conditions, living wages, working hours, legal requirements. Figure 1.1 shows the extent of their non-compliance.

 Opportunity to provide cheap quality clothes to fashion conscious individuals regardless of variation in age, gender and size in various countries in the world.

They have big and established competitors who have also been in the retail business for awhile. Relying on people to do your advertising might not be a good idea because there is no guaranty that they are spreading good words about the company. 

This is a model of business analysis that is used to understand the environment in which the company is operating in. It considers how various factors such as political, economical, social, technological, legal and environmental affects Primark. 

Primarks operations are subject to government policies and regulations such as tax policies, employment laws, environmental regulations, trade restriction, tariffs and political stability which affect the business costs. Most businesses tend to pass this cost to final consumers but primark keeps their overhead cost very low in order for them to sell to customers at a cheap price. Primark is a member of the Ethical Trading Initiative and they are determined to succeed on their own merit and not at the expense of others. Economic factors The economic factor considers economic growth, interest rate, recession, exchange rate and inflation rate. Primark is located in different countries and has global presence. If the exchange rate of a supplying country increases this could affect primark's business or the interest rate of creditors increasing. Primark has grown significantly in the past years.

In 2009, Primark opened 5 stores in various countries. Social Factor Primark has a corporate social responsibility which aims at giving all employees equal opportunities, treating suppliers fairly, supporting and respecting local communities and taking environmental responsibilities seriously. Technological Factor There is rapid change in technology and every organization should try to be at par with the change. Growth and development would be impeded if an organization does not meet the trend. In 2009, Primark invested in an auditing software (Entropy Software) that is designed to help in the effective management of suppliers with compliance to ethical standards. Primark has also set some targets to achieve in the coming year such as developing buyer reporting function on Entropy database, Launch ethical trading extranet (Online information resource) for suppliers and factories. Legal Factors The government regularly change laws in line with political polices thus causing businesses to respond to changes in legal framework. Environmental analysis Asides from Primark providing jobs for people in the environment they also support many local charitable organizations, community projects and they also replaced plastic carrier bags with paper bags thus reducing their impact on the environment. Conclusion

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