Primark delivers 'stunning' sales
Tuesday 08 September 2009
Primark, the discount fashion retailer, has posted recession-defying sales in its second half, and vowed to press ahead with its store opening programme.
The Associated British Foods-owned retailer said that its full-year sales and profits would be substantially up on last year after the warm weather helped underlying sales to soar by 9 per cent in the six months to 12 September.
John Bason, the finance director of ABF, whose other brands include Twinings and Ovaltine, said: "Nine per cent – by any imagining that is fantastic trading." The buoyant update on Primark came as ABF said that group trading had been strong since the half-year, citing a much improved performance from its sugar business, and raised its full-year guidance for earnings per share. Its results for the year to 12 September are due to be announced on 3 November.
Panmure Gordon described the performance by Primark as "stunning" after the 191-store retailer said it expected full-year like-for-like sales to be up by 7 per cent, following the buoyant second half and a 5 per cent rise in the first half. Primark has been growing underlying sales for a number of years, but Mr Bason acknowledged that it had benefited from the flight to value during the downturn. "People are buying more value clothing ... the recession has accelerated those trends."
Primark now trades from 5.9 million square feet of selling space – up 9 per cent on last year – and Mr Bason said it plans to open about 10 stores next year, following the opening of 11 in the current financial year. "I would be disappointed if we can't better that number," Mr Bason said.
Primark has stores in Ireland, Spain, Portugal, Holland and Germany – plans to launch in Belgium, with a store in Liège, and Austria next year.
ABF said that Primark's profits for the year to 12 September will be "well ahead" of last year's adjusted operating profit of £233m. But it expects its operating profit margin to be lower, hit by increased fixed overhead costs of a new UK distribution centre and lower gross margins from the weakness of sterling against the dollar.
Mr Bason declined to comment on speculation that Primark's founder, Arthur Ryan, is poised to step down as managing director, but said "he is going to be around the business for some time to come".
While Mr Ryan, 74, is expected to remain as chairman, Paul Marchant, Primark's chief operating officer, is set to become its chief executive.
ABF said that profits at its sugar business would be "substantially ahead of last year", boosted by changes to the EU sugar regime that addressed an imbalance between supply and demand in the region. Its sugar business also benefited from the acquisition of Azucarera Ebro, the biggest sugar producer in Iberia, in April. Panmure Gordon upgraded its 2009 EPS forecast by 2 per cent.
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