Penneys owner saves the day as parent company ABF struggles
PRIMARK has saved the day -- again. Even if other operating divisions don't always deliver the goods, Primark, which trades as Penneys in Ireland, has been consistently a star performer for owner Associated British Foods (ABF).
Delivering its first quarter update, ABF said that while its sugar division failed to sweeten its results for the period, with revenue in the unit down 28pc, Primark sashayed down the catwalk, with sales climbing 14pc.
ABF has a diverse portfolio of divisions, including groceries (it owns brands from Ryvita to Blue Dragon and Twinings) and agricultural products. But it's Primark that has been the clear driver of group growth, especially since ABF took the decision in the middle of the last decade to roll-out the stores across mainland Europe. And all this is being done from Primark's Dublin HQ.
ABF said that the increase in Primark sales during the 16 weeks to January 4 was the result of an 8pc increase in selling space across its network, but like-for-like sales in the period rose by 4pc.
"Trading in the year to date has built upon the exceptional like-for-like growth delivered in the same period last year," said ABF. And while it acknowledged that like-for-like sales in the first eight weeks of the first quarter were curtailed by unseasonably warm weather and strong comparative figures from 2012, the second half of the period was characterised by an "excellent Christmas period".
ABF, which is controlled by the Weston family that owns Brown Thomas and Selfridges, also said the operating profit margin at Primark was higher than in the corresponding period last year and better than expected.
The company said that it opened 14 stores in the latest period, including its first in France, which is located in Marseille. It opened on December 16.
"Early signs suggest that Primark has captured the imagination of French consumers, with one of our best store openings to date," it said.
"Primark's profit will be well ahead of last year with a higher margin than expected," ABF predicted.
But while Primark, headed by Paul Marchant, may be top of the class, the poor performance at the sugar unit depressed the overall group numbers.
ABF also warned that it would book a "substantial reduction" in profit at its sugar business this year.
"With the further recent falls in world sugar prices, this reduction will now be greater than previously expected," it said.
ABF is one of the world's biggest sugar producers.
Group revenue was flat for the latest period as that decline in sugar revenue offset the growth at Primark.
Analysts at Nomura reiterated their 'reduce' rating on ABF stock. The company's shares traded as much as 4.8pc lower yesterday.