Penneys owner raises full-year outlook after sales top expectations

Penneys and Primark, owner Associated British Foods, on Thursday raised the full-year profit outlook for its fashion business.

The adjusted projection comes after sales at stores which reopened after Covid-19 lockdowns in its latest quarter beat management expectations in all markets.

Associated British Foods said Primark’s sales were up 207 per cent year-on-year to £1.61 billion (€1.87 billion) in the 16 weeks to June 19th, while like-for-like sales were up 3 per cent compared the same period two years ago, before the pandemic hit. Primark trades as Penneys in the Republic of Ireland.

In the same period last year the first lockdowns closed all Primark stores for an average of 12 weeks. The company has stores across Europe and the United States, but does not trade online.

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This year one in five stores were open at the beginning of the quarter, while all 396 were open at the end.

Shares in AB Foods were up 5 per cent in early morning trading, extending year-on-year gains to 18.5 per cent.

AB Foods finance chief John Bason said the performance reflected an increase in confidence and willingness to spend by customers compared to previous reopenings after lockdown.

“Some of the fashion is flying off the shelves,” he said.

“That is a return to people really wanting to buy things because they’re starting to go out again, whereas previously, after the other two lockdowns, it really was all about leisurewear or nightwear or things for the home.”

Mr Bason said Primark had sold out of “really hot items”, such as pink gingham and purple power blazers and seam-free two-piece sets.

But he noted sales of swimwear for foreign holidays and formalwear were still down, reflecting the lack of overseas travel and people still working from home.

He said data for the total UK clothing market, which includes online sales, for the seven-week period after reopening showed volume and value share gains for Primark on a two-year basis.

With higher expectations for Primark’s final-quarter sales, AB Foods raised its forecast for the division’s 2020-21 adjusted operating profit before repayment of government job-retention scheme monies to “broadly in line” with 2019-20’s £362 million, versus previous guidance of “somewhat lower”.

AB Foods also owns big sugar, grocery, agriculture and ingredients businesses. Third-quarter grocery sales fell 3 per cent , while sugar revenues jumped 21 per cent.

The group now expects full-year adjusted operating profit to be in line with last year’s £1 billion pounds. – Reuters