Growing sales at Penneys helps owner ABP increase profits

Rising sales and operating margin at budget fashion chain Penneys, known as Primark in the UK, helped increase full-year profits at is owner Associated British Foods, even as sugar sales slump.

Sales at Primark stores open for at least a year rose about 4.5 per cent in the 12 months through September 13th, the London-based company that also makes Twinings Tea said in a statement ahead of detailed full-year results.

AB Foods shares have climbed 19 per cent this year, buoyed by Primark's surging sales growth in Europe and the prospects for the clothing chain's first stores in the US next year. That has offset a slump in sugar earnings and the effects of a stronger pound. The retail chain's contribution to annual operating income will probably increase to 60 per cent by the end of the next financial year from more than 40 per cent now, according to Davy Stockbrokers analyst Jack Gorman.

Primark’s “operating profit margin of 13.1 per cent in the first half was higher than last year, reflecting the benefit of warehouse and distribution efficiencies and lower freight rates,” the company said in the statement. “These benefits continued in the second half and, with the strong trading over the summer resulting in a low level of markdowns, we expect the margin for the full year to be slightly higher.”

With world sugar prices remaining “unsustainably low,” revenue and adjusted earnings will be “substantially lower” than last year at that unit, the company said. The company reiterated a July 10th forecast that full year earnings would be ahead of last year, after previously saying the figure would be at similar levels to that of the 2013 financial year.

Bloomberg