Primark sales surge prompts ABF to raise profit outlook
CUT-price fashion chain Primark has again proved to be the star of Associated British Food (ABF), with its performance prompting the group to raise is second-half profit outlook.
Headquartered on Dublin's Mary Street, Primark's full-year sales are expected to be 22pc ahead of last year's figure at actual exchange rates, according to ABF.
The group said the unit, which trades as Penneys in Ireland, has benefited from the recent strengthening of the euro, while sales have been driven by an increase in selling space as it continues its march across Europe. It will open its first store in France – in Marseille – in December.
Like-for-like sales growth at Primark will be almost 5pc ahead for the full financial year, which ends on Saturday. It added that there had been "superior sales densities" in its larger new stores.
"Like-for-like sales growth in the first half was flattered by an exceptional start to the year with the benefit of seasonal autumnal weather in 2012 compared with an unseasonably warm autumn in 2011," according to ABF. It added that while sales growth was subdued during March and April this year as winter lingered, trading in the summer months was strong.
"Operating profit margin in the first half was higher than last year, reflecting the benefit of lower cotton prices and lower markdowns," it said. "The strong trading over the summer also resulted in lower markdowns and the second-half margin will now be in line with the first half, beating expectations."
Trading in Primark stores in northern continental Europe was strong throughout the financial year, while like-for-like growth in Spain, initially held back by the large number of new store openings there, has improved, said the group.
Primark now operates about 260 stores across Europe. In the financial year just ending, the chain will have opened 16 new stores. ABF is controlled by the Weston family, which also owns Brown Thomas and Selfridges.
It operates across a range of sectors, from retailing to sugar production, grocery and agricultural products. Among the brands it owns are Twinings Tea, Patak's, Ryvita and Blue Dragon.
The company said its Twinings Tea and Ovaltine brands had performed particularly well and would both deliver "excellent sales and profit growth" in the year, with Ovaltine having made further in-roads in developing markets. Despite the upbeat trading statement from ABF, its shares slipped in London. Panmure Gordon raised its operating profit target for Primark to £505m (€599m) from £473m. The fashion chain made a £356m operating profit in the last financial year.
But with sugar prices under pressure, Panmure dropped its earnings per share estimate for the financial year that ends in September next year by 3.6pc.