ABF upbeat on Primark despite slowing growth

The firm announced it expected like-for-like sales at the retailer to rise 4.5 per cent for the year to 13 September

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The Independent Online

Associated British Foods (ABF) rejected City fears that its High Street fashion chain may have peaked, despite shares in the firm tumbling more than 5 per cent.

The company announced it expected like-for-like sales at the retailer to rise 4.5 per cent for the year to 13 September, as finance boss John Bason said: “We are not seeing a slowdown. Short-term distortions happen. This is a great year for us.”

Strong sellers over the summer included loose patterned trousers and jumpsuits, he said, adding that early sales of autumn/winter ranges were “encouraging”.

Yet despite the strong summer, ABF shares today fell to the bottom of the FTSE 100, sliding 126p to 2783p, amid a slight slowdown in Primark’s expansion plans in terms of floor space compared with last year and evidence that like-for-like growth in the fourth quarter was closer to 3 per cent.

Shares in the company have risen by roughly 60 per cent over the past  12 months, and Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “Sales at Primark look to have fallen short of high investor expectations.”

Primark’s overall full-year sales are set to rise 17 per cent at constant currency, the company said, and 16 per cent at actual exchange rates.

Bason said the chain’s margins had improved as it controlled markdowns on its clothes, and added that its expansion overseas will bolster growth with a “strong pipeline of new stores in Europe”.

The 278-strong chain will open just under one million square feet of new space in the coming year, having seen a net increase of 1.2 million square feet this year.

ABF reiterated its plans for Primark in the United States, where it is set to open 10 stores on the East coast by late 2016.

Bason claimed Primark will be able to compete with America’s fashion and discount giants, saying: “What Primark will bring its excellent fashion and store environments and amazing prices. We have a distinctive offer.”

Overall, ABF said its full-year operating profit would meet expectations, with its grocery and ingredients division delivering solid growth led by strong Twinings tea sales in the US and the UK.

But its sugar business continued to struggle in the face of weak prices and Bason said it is “dealing with the painful adjustment of EU sugar prices”.

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