Primark bucks the trend as owner AB Foods expects sales to rise 17%

DISCOUNT FASHION chain Primark continues to buck the downbeat trend evident in the retail sector, with sales for the current financial year expected to rise 17 per cent year on year.

In a pre-close trading update yesterday, Associated British Foods reiterated its full-year target as sugar sales advanced and growth accelerated at Primark, which trades as Penney’s in Ireland.

Adjusted operating profit for the year ending September 15th will be “substantially ahead” of last year, the London-based maker of Twinings tea says.

Primark’s sales for the year should rise 17 per cent, excluding currency fluctuations, AB Foods says. This was driven by a rise in retail selling space, with 19 stores being added this fiscal year and a second outlet on London’s Oxford Street due to open on September 20th, combined with like-for-like sales growth, forecast at 3 per cent.

“Trading this summer in the UK was particularly strong and sales in continental Europe remained buoyant,” it says. Early sales of its autumn-winter range have been encouraging.

Profits in AB Food’s sugar division’s profit will be “considerably higher” than last year, helped by higher prices in Europe, it adds.

Sugar is the biggest contributor to the group’s profit as increased production and prices in Africa have offset lower prices and “considerably lower” profit in China.

Profit at the grocery division will decline because of restructuring costs at George Weston Foods in Australia and Allied Bakeries in Britain as British consumers continue to rein in spending.

The company says it will take a £100 million non-cash charge for the impairment of property and equipment at its Australian meat operations, which will lead to “substantially worse” profit this year.

Davy stockbrokers reiterated its “outperform” view on the stock.

“Underlying growth prospects for 2012-2013 remain positive due to solid sugar pricing conditions and Primark’s expansion plans,” Davy analyst Jack Gorman said. – (Additional reporting: Bloomberg)