Sunday 24 September 2017

Primark Christmas bonus not enough for ABF

A model in clothes from Primark’s newest collection – Primark owner ABF has said weak sterling will hit operating profit margins
A model in clothes from Primark’s newest collection – Primark owner ABF has said weak sterling will hit operating profit margins
John Mulligan

John Mulligan

Primark and Penneys stores had a bumper Christmas, with sales soaring 22pc at the chain in the 16 weeks to January 7 as weak sterling benefited the bottom line.

The increase was also helped by a 12pc expansion in the amount of floorspace at the chain as it opened new stores and extended existing ones, according to owner Associated British Foods (ABF).

Sales on a constant currency basis were 11pc higher, but that meant that group like-for-like sales growth was effectively flat, which disappointed analysts and sent ABF shares as much as 3.7pc lower.

ABF said that sales at Dublin-headquartered Primark in the UK were strong, but that the overall like-for-like performance was hampered by declines in Germany and the Netherlands.

And it also again warned that the weakness of the pound against the dollar will hit its operating profit margin.

"As forecast, the operating profit margin will decline as the year progresses reflecting the strength of the US dollar on input costs," it said. "Foreign exchange contracts are now in place for most of the remaining purchases for this financial year."

Almost all the clothing it buys for its stores is priced in dollars.

ABF is controlled by the Weston family that also owns Brown Thomas, Arnotts, Selfridges and Fortnum & Mason.

ABF's activities extend across sugar production, grocery brands, agri products and its Primark division.

In 2015, Primark opened its first US store, in Boston, and is continuing to roll out new stores there. It opened its sixth US outlet in December.

Last year it opened its first store in Italy, in Milan. It said that new stores opened in the 16 weeks to January 7 traded strongly.

It said that sales at its stores in the Netherlands were impacted by the "rapid increase" in selling space there.

Among the other stores it opened in the period was a new outlet at the Liffey Valley shopping centre in Dublin. It brought the number of Penneys outlets in Ireland to 37.

ABF said that its market share in the UK increased in the latest period as it took business away from rivals.

The decline in sterling also saw sales at ABF's sugar unit soar.

Revenue from continuing operations at the division in the latest period was up 22pc on constant exchange rates, but 38pc higher at actual rates.

Irish Independent

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