Business Irish

Saturday 27 May 2017

Shares fall as sterling hits owner of Primark

ABF said that sales at Primark – which is based in Dublin and trades as Penneys here – are expected to be 9pc ahead of last year’s figure on a constant currency basis
ABF said that sales at Primark – which is based in Dublin and trades as Penneys here – are expected to be 9pc ahead of last year’s figure on a constant currency basis
John Mulligan

John Mulligan

Shares in Primark owner ABF plunged over 10pc yesterday as it revealed that weakened sterling has gouged a £200m (€237m) deficit in its pension scheme.

Like-for-like sales at the group's retail chain are also likely to have fallen 2pc in the full financial year that ends this week.

The pension deficit has manifested itself in the space of just a few months as ABF felt the weight of the Brexit impact on its balance sheet.

The pension had been in the black prior to that, and the fissure will see ABF now have to shoulder increased service costs next year.

While the fallout from Brexit is pummelling its pension scheme, weak sterling is boosting its profit and loss. It said that sales at Primark - which is based in Dublin and trades as Penneys here - are expected to be 9pc ahead of last year's figure on a constant currency basis.

But it confirmed that like-for-like sales are likely to have dipped 2pc, because of unseasonably warm weather in the pre-Christmas period, and cold weather in March and April.

It's the first time in 16 years that Primark will have posted a like-for-like sales decline.

That weak sterling is likely to give an 11pc lift to sales at actual exchange rates, however. ABF also said that it expects full-year to be marginally ahead of last year.

"The underlying operating performance of the group has been ahead of our expectation in the second half," said ABF yesterday. ABF noted that Ireland delivered a strong performance throughout the year, while Spain, France and Austria traded well.

ABF - which is controlled by the Weston family that also owns Brown Thomas, Arnotts, Selfridges and Fortnum & Mason - said that Primark's performance in the UK was "in line" with the group.

Primark's fourth quarter sales and operating margins were a "bit lower" than expected, and the very warm weather at the start of autumn will probably have a further negative impact on sales, according to RBC Europe analyst Richard Chamberlain.

ABF - whose group activities also extend to agricultural products, sugar production and well-known grocery brands - has continued expansion of the Primark brand in Europe and the United States. It opened its first US store, in Boston, a year ago. It now has a number of outlets open there.

The total Primark estate now includes 315 stores. It opened 16 outlets in the second half of its financial year, including its first ever outlet in Italy.

Primark accounted for about £5.3bn of ABF's £12.8bn total revenue in its last financial year. (Additional reporting Bloomberg)

Irish Independent

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