The weak pound's good for Penneys
Sterling's slump after the Brexit vote will boost earnings at Primark owner Associated British Foods (ABF), according to the company.
Shares in ABF soared over 10pc yesterday, adding more than £2bn (€2.3bn) to the group's market capitalisation, after it boosted its profit outlook for its current financial year.
ABF, a listed company that's controlled by the Weston family that also owns Brown Thomas, Selfridges and Arnotts, said that its underlying group performance during its third quarter was better than anticipated due to a slide in sterling and an improvement in its sugar business.
"Following the result of the EU referendum, sterling has weakened further and at these rates we expect a bigger translation benefit in the final quarter with no material transactional effect," ABF said.
"As a result, our outlook for this financial year has improved and we no longer expect a decline in adjusted earnings per share for the group for the full year."
ABF added that sales at Dublin-headquartered Primark in the year to date are 7pc higher on a constant currency basis, driven by more selling space.
Sales at actual currency rates in the third quarter were also 7pc higher, benefiting from the decline in sterling.
The group said it has been "very encouraged" by early trading at new stores, especially its first ever in Italy, a new outlet in the United States, and others in France.
In the current quarter, it intends to open two more outlets in the US, and will double the size of a store in Paris.
ABF noted that in the next financial year, the fall in Sterling will have both a positive and negative effect.
"There would be an adverse transactional effect on the profit margin on Primark's UK sales, currently half of its turnover, a favourable transactional effect on British Sugar's margins and a translation benefit on group profits earned outside the UK, which last year were some 50pc of the total," it said.