Primark owner's shares fall, but trading upbeat
Shares in Primark owner Associated British Foods (ABF) tumbled more than 5pc in early trading yesterday despite an upbeat trading statement.
The company expects Primark to deliver a higher than expected profit for its financial year.
ABF, which is controlled by the Weston family that also owns Selfridges, Brown Thomas and Arnotts, has activities that stretch from ownership of grocery brands such as Ovaltine and Ryvita, to sugar production and agricultural products.
It said that it expects good profit growth in its grocery, agriculture and ingredients units, but that it will see a reduced profit at its sugar division due to lower EU sugar prices.
ABF said the higher profits at Primark will be achieved through better margins.
It kept its full-year group outlook unchanged, with progress expected in adjusted operating profit and adjusted earnings per share, it told investors.
Sales at Primark in the 40 weeks to June 23 were 6pc ahead of the corresponding period in the last financial year on a constant currency basis, and 7pc higher at actual exchange rates, driven by increased selling space.
"This growth is marginally lower than the performance delivered in the first half and reflects the later phasing of space growth this year," said ABF.
Primark has expanded its presence to the United States. Earlier this year, Primark announced that it will open its first store in Florida in late 2019, having concentrated its US foray on the north-east to date.
Primark accounted for 54pc of ABF's £1.36bn (€1.53bn) operating profit in its last financial year, and 46pc of its £15.3bn (€17.3bn) in revenue.
ABF said that sales from its first four stores in Italy have been "very strong", and that its UK operations performed well and delivered like-for-like sales growth.
"This growth built on the strong comparative performance in the same period last year, but was lower than that achieved in the first half," it noted.
ABF said that Primark's operating margin in the first half of the year was 9.8pc compared to 10pc in the corresponding period last year.
It said that "better buying" virtually offset the adverse effect of the US dollar exchange rate on purchases.