Primark, the fashion retailer with the claim to the lowest prices on the high street, reported a 5 per cent increase in sales in the past six months as it pushed ahead with new store openings in the US, Italy and Spain.
But Associated British Foods, which owns Primark, said like-for-like sales at the chain fell for the first time — dipping 1 per cent — and the strength of the dollar hit its operating profits, which dropped 3 per cent to £313m in its first half.
George Weston, chief executive and scion of the family-controlled company, said: “Primark’s trading has only been marginally down in the UK, which had been a tough market. In the rest of Europe the numbers are good.”
Other British clothing retailers, including Marks and Spencer and Next, have recently reported weak trading, as consumers have become more unsettled about their finances.
Primark’s operating profit margin was better than expected at 11.7 per cent. This lay behind ABF overshooting analysts’ earnings forecasts.
The UK accounts for just under half of Primark’s sales as the chain continues its international expansion, which took it into the US for the first time last year. It said new openings would accelerate in the second half, when it expected to have added 1.1m sq ft of space to the 300,000 sq ft opened in the first half.
“Primark’s growth in particular is weighted towards the second half,” said analysts at Société Générale.
Primark’s rapid expansion has made it the biggest business within ABF, accounting for almost half its sales and 59 per cent of operating profits.
ABF, which also owns Twinings tea, Ovaltine beverages and Kingsmill bread, reported better than expected pre-tax profits of £466m in the six months to the end of February — its first half.
This was a 4 per cent rise, excluding exceptionals. It was more than double last year’s £213m, when profits were hit by losses in its sugar business and exceptional items.
The sugar business returned to profitability thanks to tight cost-control, while profit margins increased in groceries and agriculture, though sales at the latter were hit by low commodity prices.
Sugar prices have been falling for the past three years but despite this, ABF paid £262m to take control of the South Africa-based Illovo Sugar factory.
Mr Weston said that after three years of low global prices, “I think we’ve turned the corner. Sugar prices are moving up.”
Earnings per share were flat, which was better than the “marginal” decline in underlying EPS that ABF had forecast. Nevertheless, the company stuck to its full-year outlook of a marginal decline in EPS, citing the uncertain outlook for currencies.
Sales of £6.1bn were 2 per cent down on the same period last year but were 2 per cent up, at constant currencies.
The shares closed 2 per cent higher at £34.13.