Primark sales surge lifts profits at AB Foods

A piece from Primark's summer collection. Picture: Contributed

Primark’s like-for-like sales increased 7 per cent in the 24 weeks to the start of March, a performance described as “exceptionally strong” by owner Associated British (AB) Foods.

It was also helped by an “ideal combination” of lower cotton prices, better exchange rates and lower markdowns as operating profits surged 55 per cent to £238 million at the 257-store chain.

Once 15 store openings were factored in, sales raced 24 per cent ahead to almost £2 billion.

The retailer’s growth drove a 25 per cent surge in adjusted pre-tax profits to £452m at AB Foods, which also owns British Sugar as well as household brands Kingsmill, Ryvita and Twinings.

Chairman Charles Sinclair said: “The Primark success story continues. Trading in the period was very strong, the profit margin was much improved, customers in continental Europe have taken enthusiastically to the Primark brand and there is very real momentum in the addition of selling space.”

Many retailers have been finding the going tough as consumers fret over job security and a squeeze on incomes and the high street has suffered also from online competition.

But Primark has been among the winners and its performance is in sharp contrast to poor clothing sales at Marks & Spencer, where recent cold weather and weak consumer spending drove general merchandise sales down 3.8 per cent in the first three months of the year.

Primark added 700,000sq ft of selling space during the half, and new stores included a second branch on London’s Oxford Street, a relocation in Sunderland and six more outlets in Spain.

The retailer’s European expansion is set to continue, with plans for its first stores in France in its next financial year.

However, its pace of expansion will slow during the rest of this financial year, with a further 100,000sq ft of space mainly confined to extending its Newcastle and Manchester stores.

For the full year, AB Foods expects strong profit growth at Primark, but not at the same pace as its first half as cotton prices level out.

Revenues at AB Foods surged 10 per cent to £6.3bn and the group lifted its dividend 10 per cent to 9.35p per share.

Despite the squeeze on consumer spending, its grocery arm grew profits by almost 30 per cent to £97m, boosted by a Twinings advertising drive in the UK.

AB Foods said its bakery arm managed to recover costs in a “highly competitive” bread market.

Its sugar business grew sales but recorded a 5 per cent fall in profits to £163m as trading in China deteriorated. The group said reduced European sugar production and lower prices in China will continue to weigh on the division.

Shares in AB Foods, 55 per cent of which are owned by the family of chief executive George Weston, have risen 51 per cent over the past year.