Primark UK sales growth slows amid weather hit
Primark saw UK like-for-like sales rise 3% in the six months to March 3 – down on the 5% growth seen in the previous year.
The owner of budget fashion chain Primark has seen UK sales growth slow as it became the latest retailer to reveal a weather hit.
Associated British Foods said Primark’s UK like-for-like sales rose 3% in the six months to March 3 – down from 5% growth seen in the previous year.
It said trading was impacted by an unusually warm October and the Beast from the East in the final week of its first half.
Our UK performance was remarkable in the circumstances. George Weston, Primark CEO
Overall like-for-like sales at Primark fell 1.5% in the half-year as the impact was felt more acutely elsewhere in Europe, in particular northern Europe.
Underlying operating profits rose 4% at Primark to £341 million on a constant currency basis, despite the sales woes and a knock to its profit margins from the weak pound.
But AB Foods said the UK performance at Primark was “remarkable” amid difficult conditions and said profit growth would ramp up in the second half.
Chief executive George Weston – whose family owns the majority of AB Foods shares – said: “Our UK performance was remarkable in the circumstances and delivered a strong increase in our share of the total clothing market.
“Looking ahead we expect this profit growth to accelerate with the continuation of our retail selling space expansion and an improvement in margin following the recent strengthening of sterling against the US dollar.”
Primark saw group sales fall significantly in October, while it added the final week was “challenging” due to the freezing temperatures across northern Europe.
It said sales were 1% higher in the 15 weeks to February 24, which it said was “encouraging”.
The group opened another seven Primark stores in the first half, including at Charlton and Staines in the UK.
Across the wider group – which also owns Twinings tea and Kingsmill bread – underlying half-year pre-tax profits lifted 1% to £628 million as an earnings drop at its sugar arm weighed on results.
Bottom line pre-tax profits slumped 30% to £603 million after figures from a year earlier were boosted by a £255 million gain from the sale of its US herbs and spices business and south China cane sugar operations.
Grocery underlying earnings rose 9% to £159 million at constant exchange rates in the first half.
But its sugar business was left nursing a 24% plunge in underlying operating profits to £90 million due to lower prices across the EU.
Shares rose more than 3% on AB Foods’s upbeat profit outlook for the second half, while the group also said it remained on track to see “progress” in underlying earnings.
George Salmon, an equity analyst at Hargreaves Lansdown, said the weather had not done Primark “any favours”.
He added: “However, that bout of unseasonably cold weather is now behind us, and in any case investors know being open to the elements is just part and parcel of the retail game.
“What’s impressive in these results is management’s assertion that profitability in the all-important retail division will rise in the second half
“Part of this is due to the benefit of a weaker dollar, but Primark has managed its stock well and improved its buying positions too.”