Sharp rise in Primark profits support ABF earnings

Full-year outlook for the group unchanged as Penneys/Primark lifts ABF profits

The value-focused fashion retailer has managed to largely swerve the recent struggles on the British high street

The value-focused fashion retailer has managed to largely swerve the recent struggles on the British high street

 

A sharp rise in profits at Penneys/Primark boosted earnings at owner Associated British Foods, helping the conglomerate keep its 2019 outlook steady.

ABF said on Wednesday that group revenue ticked 1 per cent higher to £7.53billion in the 24 weeks to March 2nd, while adjusted operating profits slipped 1 per cent to £639million.

The full year outlook for the group was unchanged, with adjusted earnings per share expected to be in line with last year.

ABF is a food-to-fashion conglomerate with a diverse stable of businesses ranging from sugar and other agricultural products to pharmaceutical products.

Affordable retailer Penneys/Primark was responsible for the bulk of ABF’s profit in the most recent trading period, 25 per cent higher year-on-year at £426million thanks to a much higher margin.

ABF said the results at Primark were driven “not only by favourable exchange rates but also by better buying.”

Sales were 4.4 per cent higher than in the previous year, but that was driven by the company’s rapid growth and increased selling space. Like-for-like sales, a closely watched industry metric slipped 1.5 per cent, a slightly better decline than the company had flagged in February.

The value-focused fashion retailer has managed to largely swerve the recent struggles on the British high street, despite some wobbles around last year’s Black Friday event.

Black Friday

On Wednesday, ABF said the effects of the disappointing Black Friday in November were offset by good trading in other months. Sales in the UK were 2.3 per cent higher for the period, while like-for-like sales grew by 0.6 per cent.

The strong profits at Primark helped offset a 13 per cent fall in revenue at ABF’s sugar business, which was hit by lower prices in the EU, while adjusted operating profit in the relatively small agriculture business fell nearly 40 per cent.

ABF said it has a “concern” over the risk of an abrupt “no-deal” Brexit, but that it has made the necessary preparations for a scenario it sees as “unlikely”.

- The Financial Times Limited