Sweet relief: Primark boosts revenue to alleviate owner ABF’s sugar woes
Despite a gloomy outlook for retailers, Primark expects to increase revenue by 1.5 per cent to boost profits this financial year, offsetting a fall in sugar prices in Europe for owner Associated British Foods (ABF).
Strong first and second half sales are expected to help the budget clothes brand to post the increase, with UK stores’ performance driving full-year sales six per cent higher in the 12 months to the end of September.
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Stores in Spain, Portugal and Italy also delivered “very strong sales growth”, according to a trading update today.
However, northern Europe delivered a decline, which ABF attributed to “unseasonable weather during three periods this year”, driving shoppers from the high street.
Overall, sales for Primark are expected to grow by 5.5 per cent, as more store space makes up for a two per cent decline in like-for-like sales.
The retailers operating margin is expected to grow to 11 per cent, up from 10.4 per cent last year, thanks to successful summer sales despite the strong dollar pressing down Primark’s margin in the first half of the year.
Primark’s store expansion has helped mitigate falling sugar revenue in ABF’s AB Sugar brand, which was caused by significantly lower EU prices hitting its UK and Spanish businesses.
It increased its store footprint by 0.9m sq foot, with 15 new store openings, bringing the total number to 360 stores, or 14.8m sq foot.
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Four new stores arrived in the UK, five in Germany, two in France and one each in Portugal, Belgium, Spain, Netherlands and the US.
Primark’s success comes against a murky backdrop for retailers, with the British Retail Consortium today revealing that footfall fell by 1.6 per cent over summer. Rising food inflation left shoppers with less money for non-essential items.
Shares in ABF fell by three per cent in early morning trading to £21.97 despite the firm expecting an improvement in operating profit, as investors reacted to the fall in sugar's fortune, and news the company will lose £20m as a result of the sterling's renewed strength against other currencies it trades in, with two-thirds of profit earned outside the UK.