Associated British Foods has today raised its full year profit outlook with its Primark fashion business boosted by warm weather kicking in across its European markets and its food unit trading well.
Primark trades as Penneys here.
Consumers across Europe have defied expectations of a slowdown as their spending power has been eroded by high inflation.
Last week Primark rival Next raised its sales and profit guidance for the year, saying trading had exceeded expectations on the back of warmer weather and consumers' wage increases.
Also Zara owner Inditex has reported a strong start to summer, while H&M has reported a strong start to June.
"The doom and gloom (commentary) has been around now for almost 12 months and the consumer continues to outperform the doom and gloom," AB Foods finance chief Eoin Tonge told Reuters.
Primark's 13% jump in sales to £2 billion in the 12 weeks to May 27, its fiscal third quarter, was driven by higher average selling prices and strong sales of seasonal clothing and accessories as well as health and beauty products.
Like-for-like sales rose 7%.
"Most of our markets kicked in when the sun started to shine," said Tonge, noting trading in the UK had been even better in June as temperatures soared.
Primark had forecast in April that like-for-like sales growth would moderate in its second half from the 10% achieved in the first half, given the ongoing cost of living crisis.
UK households are in the midst of the biggest two-year squeeze in living standards since comparable records started in the 1950s, according to government forecasters. Inflation is running at 8.7% and consumers are also being hurt by higher taxes and borrowing costs.
However, UK retail sales rose in May, according to official data, suggesting most consumers are coping with the hit to their spending power.
AB Foods, which also owns major sugar, grocery, agriculture and ingredients businesses, said it now expected full-year adjusted operating profit, its key profit measure, to be "moderately ahead" of the £1.435 billion made in 2021/22.
It was previously forecasting an outcome broadly in line.
The group, whose shares have risen 23% so far this year, said third-quarter sales in its grocery business, which includes Twinings tea, Jordans cereals and Ovaltine drinks, rose 13% to £1.06 billion, driven by price rises implemented earlier in the year to offset input cost increases.
A new Penneys store in Dundrum Town Centre in Dublin opened last week after a €16m investment by AB Foods.
In addition to the new store in Dundrum, Primark opened another four stores across Europe and the US last week.
These included a second store in Romania in the city of Bucharest, its first store in Lanzarote, Spain, a new store in Long Island, New York, and a newly extended store in Liverpool, the UK.
This brings the total number of Primark stores globally to 425.
Meanwhile, Associated British Foods has not pushed through further grocery price increases for its retail customers since it last reported in April, its finance chief said today.
Any signs that food inflation is moderating are being closely watched by consumers, who have been squeezed by rising prices over the last 12 months, and by governments across Europe.
Third quarter to May 27 sales in AB Foods grocery business rose 13% to £1.06 billion, driven by price increases implemented earlier in the year to offset input cost rises.
Finance director Eoin Tonge said no new "pricing actions" had been implemented by AB Foods since April.
"There's probably very little new pricing going in through the system in grocery retail in the UK," he said.
He said the few exceptions included items like sugar.
