Primark owner AB Foods raises full-year guidance after strong trading year

A total of 30 new Primark stores have opened across nine countries during the financial year so far. AB Foods said that it expects to open 19 more over the next financial year

Big new stores are due to open in Stuttgart and Munich in Germany; Toulouse and Bordeaux in France; and Antwerp in Belgium (Getty)

Primark owner Associated British Foods has raised its forecast for full-year results, particularly citing a strong performance at the low-cost fashion chain and a major boost from a slump in the pound.

In a trading update on Monday, the company -- which also has sugar, grocery and agriculture and businesses – said it expects to “report good growth” in adjusted operating profit and adjusted earnings per share for the full year to 16 September.

It’s due to publish a final full-year earnings report on 7 November.

“In our third quarter trading update on 6 July we reported an improvement in our expectation for the group's full-year underlying operating performance as a result of a stronger profit delivery from Primark,” it wrote. “Since that time we have experienced an even lower level of markdown which has further improved our full year outlook. Adjusted operating profit for the group will be well ahead of last year.”

For Primark, which accounts for over half of AB Foods' profit, the group said that it expects sales for the full year to be 13 per cent head of the previous year’s figure at constant currency. At actual exchange rates, sales are expected to be 20 per cent ahead.

A total of 30 new Primark stores have opened across nine countries during the financial year so far and AB Foods said that it expects to open 19 more over the next financial year, with most of the expansion happening in France, Germany and the UK.

Big new stores will be in Stuttgart and Munich in Germany; Toulouse and Bordeaux in France; and Antwerp in Belgium.

AB Foods said that third quarter trading was particularly strong in the lead up to Easter and noted that favourable weather in the fourth quarter drove performance too.

“Early trading of the new autumn / winter range has been encouraging,” it added.

Unlike many companies in the UK, the fall in the pound in the aftermath of last year’s Brexit vote has benefited AB Foods because some two thirds of the group's operating profit is earned outside the UK.

It said that because of this, the devaluation will result in a translation benefit of some £85m this financial year, most of which materialised during the first three quarters.

Net cash at the end of the year is expected to be £650m, compared to net debt of £315m in the previous year.