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Business News

Flying the flag pays off at Primark as ABF breaks the £1bn barrier


Patriotic shoppers piled into the cut-price fashion chain Primark to celebrate the Jubilee and Olympics over the summer, helping send annual profits in owner Associated British Foods (ABF) past the £1bn mark for the first time, the company said yesterday.

The sales phenomenon saw the chain – whose performance put struggling Marks & Spencer in the shade – sell more than 7.5 million items emblazoned with the national flag during the summer, according to chief executive George Weston.

"It was the summer of the Union Jack," said Mr Weston. "My daughter bought a onesey, and I think I bought a shirt and a belt with a Union Jack on. It was a fashion statement, it was fantastic. Primark is a particularly good place to go to if you've got a celebration but you don't want to spend too much."

Primark's austerity shopping offer goes shows little sign of losing its appeal, with the average customer spending £17 on four and half items.

Its profits rose 15 per cent to £356m in the year to 15 September, on sales which have doubled to £3.5bn in the past five years. This – plus a great year from its sugar business – helped drive ABF's overall benchmark profits up 17 per cent to £1.08bn. The dividend is also up 15 per cent to 28.5p.

Mr Weston was also upbeat about prospects for the crucial festive season: "The autumn and winter ranges were well received and I'm confident about Christmas."

Management is also considering further expansion of the chain in the UK, where it has 157 of its 249 stores.

"Certainly I don't think that 200 is impossible, but there is also the possibility of extending existing stores as well," the chief executive added.

Martin Deboo, an analyst at Investec, said 2012 had been an "annus mirabilis" for ABF, which has sales of £12.3bn as well as 106,000 employees in 47 countries. Across the UK and Europe, Primark now employs 10,000 more people than it did a year ago and is thriving in austerity-blighted Spain as well as European powerhouse Germany. The company's new store in Berlin broke all trading records for an opening day.

Despite disappointments from ABF's ingredients business, which was hit by rising raw material prices, analysts expect the fashion chain to move from strength to strength.

Shore Capital's Clive Black said: "In the current year we expect decent momentum to persist from Primark with double-digit constant currency sales as the business consolidates its strong positions in core markets, develops the infrastructure and advances into new catchments, most particularly in Germany."