Primark to continue expanding

Associated British Foods has posted a 17 per cent rise in full-year profit after what it termed an “exceptional performance” in its sugar operations and at its Primark discount clothing stores.

The firm said it would continue expanding its discount clothing retailer Primark across Europe, defying weak consumer sentiment that has blighted many peers as consumers hunt for bargains.

Primark grew revenue by 17 per cent at constant exchange rates, meeting analyst expectations.

“The fact that they delivered on Primark margins will be well received,” said Dirk van Vlaanderen, an analyst from Jefferies. “That’s definitely the big bright spot of the business.”

Primark’s operating profit margin was 10.2 per cent, level with its results a year earlier.

Primark has been one of the best performing stores on shopping streets in Britain, Ireland and Spain thanks to its low prices and quick adoption of fashion trends.

The company said it did not expect subsidiary AB Sugar to perform as strongly in the year ahead, as a result of lower EU production, but it would be more than offset by further growth at Primark and some recovery in its grocery business.

The company, which also sells Twinings tea and Kingsmill bread, forecast “further progress” in sales and profit. It also controls Illovo Sugar Ltd, the largest maker of the commodity in Africa. “The sugar will be down but if they can hold that Primark margin then I think that should be fine,” Mr van Vlaanderen said.

Chief executive George Weston said expansion in countries such as Spain, where it has built 16 new stores in the past 15 months, was likely to remain high. – (Reuters/Bloomberg)