Saturday 1 October 2016

Warm winter hits Primark as owner shrugs off Brexit threat

Published 20/04/2016 | 02:30

Models showcase designs from the Penneys collection.
Models showcase designs from the Penneys collection.
Customers line up at the new Primark fashion store in Milan, Italy. Photo: Bloomberg

Sales at Primark rose 5pc to £2.6bn (€3.3bn) in the six months to the end of February, but operating profit slipped 3pc to £313m (€396m) as it shouldered the impact of currency exposures.

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And like-for-like sales in the period dipped 1pc, the first such fall in Primark's first-half sales in 12 years.

"Following a strong performance at the start of the financial year, trading was weaker in the weeks leading up to and over Christmas, as a result of unseasonably warm weather across norther Europe," Associated British Foods chief executive George Weston said.

Owner Associated British Foods (ABF) said the Dublin-headquartered chain had performed strongly in the period, and that early trading in its US stores has been encouraging. Last week, Primark opened its first ever store in Italy, close to Milan. It will open its next Italian outlet at Brescia, and one in Florence in 2017.

ABF said that its stores in France had delivered a strong like-for-like performance, and that the impact of new store openings on like-for-like sales in existing stores in Germany and the Netherlands had eased.

Mr Weston said that Primark, which trades as Penneys in Ireland, buys a substantial proportion of its garments in US dollars, and sells them in euros and sterling, giving rise to transactional currency exposures.

He pointed out that last year's results were protected from the devaluation in early 2015 of the euro against the dollar. However, the impact of the devaluation was felt in the first half of the current financial year.

Group revenue at ABF was 2pc lower at £6.1bn in actual exchange rates during the first half of the financial year, while adjusted operating profit was 3pc higher at £486m on the same basis.

ABF's activities range across clothing, sugar production, agricultural products and grocery products.

The group also said that the upcoming UK referendum on continued EU membership has "created uncertainty in the business community and financial markets".

But it downplayed the Brexit threat to the group, especially its Primark unit. "Primark operates discrete supply chains for its stores in each of the UK, US and Eurozone. We undertake relatively little cross-border trading between the UK and the rest of the EU," it said.

Irish Independent

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