Primark fuels AB Foods profits
Primark-owner Associated British Foods expects growth in its half year profits to be driven by its discount fashion chain, which has gained as under-pressure British shoppers seek out bargain prices, and by a strong performance from sugar.
Western European shoppers have cut back on spending as unemployment has risen and wage rises stagnate, but Primark which earns around a third of the group’s profits, has faired better than most with its offer of cheap chic along the high street.
Primark’s closely-watched like-for-like sales growth in its first half slowed to two per cent, slightly below both a consensus and a previous year’s performance of three per cent.
Overall sales are expected to be 15 per cent ahead and operating margins lower, reflecting the impact of higher cotton prices.
The company said Primark trading started slow due to warm autumn weather, but it saw strong sales over Christmas and good trading since the New Year. It added cotton prices have fallen from their highs last year and it will begin to see the benefit in its second half.
The group, which also owns Silver Spoon sugar and Twinings tea, said on Monday its half year results to 3 March will be in line with its expectations, with adjusted operating profits ahead of last year and earnings a little ahead. The half-year results will be published on 24 April.