Primark lifts sales for upbeat AB Foods

Thursday 11 July 2013 17.56
Sales at Primark up 22% so far this year
Sales at Primark up 22% so far this year

Associated British Foods is seeing signs of improving consumer confidence, with a strong performance from its Primark discount clothing chain helping to lift third-quarter sales by 8%.

While many retailers have struggled as consumers fret over job security and squeezed incomes, Primark's low prices are pulling in cost-conscious customers.

Sales at Primark, which has more than 250 stores in Britain and Europe and generates about a third of the group's profit, grew 20% in the 16 weeks to June 22 and are up 22% in the year to date.

Primark trades as Penney's in Ireland.

As expected, Primark's third-quarter sales growth was slower than in the first half of its financial year, when sales rose 24%, including new stores, and by 7% on a like-for-like basis.

Its third quarter was hit by freezing weather in March and April, which kept shoppers off the streets.

AB Foods, which will step up Primark's store openings in the new financial year, including its first in France, said that underlying sales had been "subdued" by cold weather in the period but had recovered "markedly" since then.

Meanwhile, third-quarter revenue at the group's grocery division, which includes the Twinings, Ryvita and Ovaltine brands, rose 7%. However, its sugar business saw revenues fall by 15% because of delivery timings in the UK and shipments of Zambian exports to the EU coming after the end of the quarter.

AB Foods said that it remains on track for adjusted full-year earnings per share (EPS) in line with expectations.

Primark's fortunes contrast with fellow retailer Marks & Spencer, which earlier this week posted an eighth consecutive quarterly fall in clothing sales.

Primark added that its first foray online in a trial launched last month with online fashion merchant ASOS had drawn an "excellent" response, though it reiterated that the initiative remains a trial.

The business came under scrutiny in April after 1,129 people died in the collapse of a factory in Bangladesh, where clothes were made for various international brands including Primark. The collapse of the Rana Plaza building ranks among the world's worst industrial accidents and highlighted the risks involved with the global retail industry's search for cheap production.

In May, a new accord was launched by trade unions and signed by 70 brands, including Primark, which have agreed to accept legal responsibility for safety at their Bangladesh factories.