Primark hails profit cheer amid resilient UK festive performance
PRIMARK owner Associated British Foods has said profits at the budget fashion chain are "well ahead", despite a fall in like-for-like sales over its festive quarter.
The retailer saw a "modest decline" in like-for-like sales in the 16 weeks to January 5, although total sales lifted 4 per cent as it opened more stores.
It cheered a better-than-expected festive performance for its budget high-street chain in the UK, with total sales up 1 per cent.
On a like-for-like basis, it said UK sales rose in September and October, but lower numbers of shoppers in its stores hit trade in November.
The group added that despite the overall modest decline in global like-for-like sales, profits were "well ahead" at Primark thanks to a higher operating profit margin.
Primark had previously warned that trading was "challenging" in the run-up to Christmas, reporting that like-for-like sales fell 2.1 per cent in the year to September as bad weather weighed on trading in Europe.
ABF said growth was “especially strong” in France, Belgium and Italy and that its performance “strengthened” in Spain, its second-largest market, but that soft trading continued in a difficult German market.
In the US, sales were “well ahead” and benefited from “very strong” trading at its Brooklyn store, which opened in July 2018.
Primark has added 300,000 sq ft of selling space over the current financial year with its 364 stores comprising 15.1 million sq ft as of January 5. It opened four new stores over the period in Seville, Almeria, Toulouse and Berlin.
It expects to open another 600,000 sq ft during this financial year with a greater presence in New Jersey, Birmingham and Slovenia.
Overall, AB Foods - which also owns a sugar business and grocery business including Twinings and Ovaltine - saw group-wide revenues rise 2 per cent on a constant currency basis in the 16 weeks.
It saw sugar revenues fall 12 per cent at constant exchange rates, and 14 per cent on a reported basis, after it was impacted in the UK and Spain by lower EU sugar prices for contracts negotiated at the end of its last financial year.
Grocery sales lifted 3 per cent at a constant currency and 2 per cent on a reported basis, while its agriculture and ingredients arm saw sales increase 5 per cent and 6 per cent respectively.
Tom Stevenson, investment director from Fidelity Personal Investing's share dealing service, said AB Foods had delivered a "sweet and sour" update.
He said: "Sugar is suffering from low European prices but that was well-flagged. Retail remains the star turn.
"Without a strong online business, Primark has to rely on under-cutting its fast fashion rivals to maintain its lead on the struggling high street."