Monday, 10 December, 2018

Primark owner AB Foods maintains guidance after…

The bargain fashion chain helped to increase revenue for its owner Associated British Foods by 4 per cent The bargain fashion chain helped to increase revenue for its owner Associated British Foods by 4 per cent Toby Melville  Reuters
Nellie Chapman | 18 January, 2018, 15:28

Primark owner Associated British Foods (ABF) achieved "record" retail sales in the week before Christmas with strong growth in the United Kingdom, but shares in the firm have fallen on a weaker than expected outlook for its sugar division.

Management still were confident in the full year outlook for the group as a whole, not changing previous guidance that 2018 will see "progress" in adjusted operating profit and adjusted earnings, though the exact degree remains unquantified.

The food, ingredients and retail group said it delivered revenue growth across all businesses apart from sugar, which saw revenue fall 13%.

At Primark, which accounts for about half of group revenue and profit, sales rose 7% on a constant currency basis, driven by new store openings.

Primark has celebrated record Christmas sales thanks to over 300,000sq ft of added retail space.

United Kingdom sales were reportedly strong during the period, thanks to a ramping up of retail space. Furthermore, a disappointing overseas performance detracts from the group's much rosier overall picture of revenues +4% YoY at constant FX; unseasonable warmth in October dented European sales, whilst despite making "progress", the USA is likely to remain a concern.

Retail selling space increased by 0.3 million sq. ft. since the financial year-end and at January 6, 2018, Primark operated 350 stores. But while like-for-like sales in the United Kingdom were "strong", its mainland European business was held back by unusually warm weather in October, it said. Sales in the United Kingdom and U.S. are progressing well.

AB said that Primark's operating margins in the first half are expected to be close to past year, with better buying effectively offset by the adverse effect of the weaker sterling-dollar exchange rate on purchases.

The agriculture business saw revenue rise 12% across the 16-week period and the company expects profit growth for the full year.

AB Foods shares were down 1.5% at 2,813.00 pence each on Thursday. And after a bumper Christmas, proving Primark can maintain sales to offset weakness elsewhere will be a key challenge when it publishes Q2 results in late February.