Associated British Foods said it was poised for further growth as it reported a 32% rise in full-year profit, driven by robust performances from its Primark clothing business and grocery division.
Primark trades as Penneys here.
In the year to September 14, the group's adjusted operating profit, its preferred earnings measure, rose to £1.998 billion from £1.51 billion in 2023/24. Revenue climbed 2% to £20.1 billion.
The group said it was confident on the outlook for Primark, its ingredients and agriculture divisions, and its grocery business, which includes products such as Twinings tea, Jordans cereals, Kingsmill bread and Ovaltine drinks.
However, it reiterated its caution on its sugar business due to a recent reduction in European sugar pricing. It forecast adjusted operating profit for sugar in 2024/25 to fall to between £50-75m from the £199m made in 2023/24, before recovering in the following year.
The group said Primark is targeting mid-single percentage digit sales growth in 2024/25, with adjusted operating margin in line with the 11.7% achieved in 2023/24.
It said over the medium and long term, Primark had significant opportunities to grow.
"We believe our long-term, patient investment approach will deliver strong returns and continue to create value for all stakeholders," said CEO George Weston.
The group also announced a further share buyback programme of £500m. Its shares have risen 8% over the last year.
Separately today, German online fashion retailer Zalando reported a higher profit margin for the third quarter, while British rival ASOS forecast a jump in earnings in its 2025 financial year.
Primark/Penneys expecting a good Christmas
Primark/Pennys is expecting to trade well in the run-up to Christmas, the boss of its parent said today.
"We think that Christmas is going to be good," George Weston, CEO of Associated British Foods, told Reuters in an interview after the group reported annual results.
He highlighted the strength of Primark's product ranges and noted "there's a little bit more consumer spending power available to our shoppers."
Weston said Primark's trading had improved after AB Foods updated the market on September 5.
In that statement, Primark had forecast like-for-like sales would be 0.5% lower in its second half to September 14. However, the outcome turned out to be up 0.5%, he said.
He said trading in September and most of October was "very strong", followed by "a couple of soft weeks" as warmer weather put shoppers off buying coats and knitwear.
"We've never seen such a reaction to weather previously. Our shopper spends her money when she needs to, not in anticipation of needing something," said Weston.
In last week's budget, the new UK government raised employers' National Insurance, or social security, contributions by 1.2 percentage points to 15% from April, and also lowered the threshold for when firms start paying to £5,000 from £9,100 a year. It also raised the minimum wage for most adults by 6.7% from April.
Weston said the insurance changes would cost Primark, which employs 40,000 in the UK, "tens of millions" of pounds, though the rise in the minimum wage was anticipated.
"We'll have to work hard to offset them, the last thing we'll do is increase our prices," he said, noting Primark's prices will not rise in the autumn/winter season.
The CEO did, however, welcome the UK government's focus on growth.
"If we get growth, if we get more spending power particularly in our consumers, I think that will be very helpful," he said.
