Appetite for cheap fashions offsets AB Foods shortfall

The rapid expansion of the low-cost clothing retailer Primark has helped boost the profits of AB Foods as the UK consumers' appetite for cheap clothes helped offset problems at the parent company's bakery division.

AB Foods, which owns the Twinings tea and Kingsmill bread brands, has invested in rolling out the Primark chain to 32 new locations over the past year as it looks to capitalise on the recent surge in the popularity of cheap fashion among UK shoppers. The new stores helped boost Primark's sales by 37 per cent to £1.6bn in the year to mid-September and the company said it will continue to expand the number of stores from the current 170 outlets over the coming months, just not at the same breakneck speed as over the past year.

However, stripping out the effect of the new stores, the country's second-largest clothing retailer's performance was less impressive as like-for-like sales increased only 1 per cent, although that figure will rise this year as the new store roll out decelerates. The company said it was comfortable that it would continue to trade well if a downturn in consumer confidence emerges.

The strong performance helped offset weakness at its Kingsmill bread division which was hit by the soaring cost of wheat as well as the weaker US dollar. AB Foods, which re-launched the brand earlier this year, expects to raise the price of bread to offset higher commodity prices.

The company's UK sugar division also struggled over the year as the company adjusts its business to reflect the European Union's sugar quota cuts. The impact was offset by a good performance in its African sugar business Illovo and in China where AB Foods has invested in a sugar beet joint venture.