Input costs lower second half margins for Penneys
UK conglomerate Associated British Foods (ABF), which owns the high-street fashion chains Primark and Penneys, has warned investors that operating margins at the retail business will be lower than previously anticipated during the second half of its financial year due to higher input costs.
Shares in ABF weakened slightly during the day, even as it said like-for-like sales at Primark and Penneys were expected to be 3pc higher in the second half, but with just "some growth" in Ireland and the UK in light of depressed consumer demand.
ABF, controlled by Canada's Weston family which owns Brown Thomas and Selfridges, has been expanding the Primark brand throughout continental Europe in recent years. It said it expected like-for-like sales at those continental stores to be "strongly ahead" in the second half.
But the group told shareholders that operating margins in the current half would be lower than expected, reflecting higher input costs and the full effect of the absorption of the UK VAT increase.
It also absorbed increases in cotton prices.