Sales boom at Primark boosts owner ABF
PRIMARK owner Associated British Foods has hailed an “excellent” year for the budget fashion chain after sales jumped by 16 per cent on a year ago.
The performance, which represented a like-for-like rise of 4.5 per cent when new store space is stripped out, helped the conglomerate offset sharply lower sales in its sugar division and the impact of the pound’s recent strength on overseas earnings.
As well as Primark’s continued progress, AB Foods has been cheered by good growth in its grocery division after strong demand from green tea drinkers helped Twinings Ovaltine post double-digit sales growth in the year to 13 September.
The division’s Allied Bakeries arm also grew revenues and profits after the launch of Kingsmill Great White boosted market share.
Primark, headquartered in Dublin, has been the jewel in the crown at AB Foods for a number of years, leading to a Europe-wide estate of 278 stores and 10.2 million square feet of selling space.
In the last financial year, Primark opened 1.4 millionsq ft of selling space in 28 new stores, the most recent being in Bath and Berlin.
It said yesterday: “We have a very strong pipeline of new stores in Europe extending over a number of years. We expect the increase in selling space in the next financial year to be a little less than a million sq ft, to be followed in the autumn of 2015 by a strong programme of openings.”
AB Foods said early sales of its new autumn/winter range were encouraging and that Primark’s full-year sales are expected to be 17 per cent higher than the previous year at constant currency rates and 16 per cent ahead at actual exchange rates. The full-year operating profit margin is also forecast to be slightly higher than the previous year.
By contrast, Marks & Spencer, Britain’s biggest clothing retailer by annual sales, has posted 12 straight quarters of declining sales in its general merchandise division. Primark said it is on track with previously announced plans to enter the US market towards the end of 2015. It has signed a lease on a store in Boston and is in discussions on tenother outlets in north-east America.
Independent retail analyst Nick Bubb said: “The way things are going, M&S is soon going to be overtaken by Primark, with Primark set to make over £600m operating profit on sales of £5bn in the year about to finish.”
But shares closed down 152p at 2,757p after investors were rattled by the continued impact of falling prices on its sugar division. Revenues and adjusted operating profit for AB Sugar will be substantially lower than last year, with lower volumes in north China and a currency translation impact of some £20m also to blame.
The decline in prices reflects the end of EU sugar quotas in 2017, although the speed of adjustment has been faster than the company expected.
British Sugar produced 1.32 million tonnes of sugar compared with 1.15 million tonnes a year earlier.
Good growing conditions extending into the mild winter resulted in a higher beet yield and sugar content than last year.