Associated British Foods plc, the parent company of Primark (trading in Ireland as Penneys) issued a positive trading update for the 16 weeks to 5 January 2019 summarising the significant trading developments since their last market update. Over the last year shares had fallen about 25% but the latest report has sent shares up 6.7% higher.
The trading outlook for the group remains unchanged, with adjusted operating profit and adjusted earnings per share for the year expected to be in line with last year. The group’s major activities, apart from the retail arm, include interests in sugar, agriculture, ingredients and grocery. AB Foods own brands such as Ovaltine, Ryvita, Twinings tea and Jordans.
Finance Director John Bason said:
If anybody believes that you can just go ahead without some sort of an agreement here, I think that that is reckless. The UK’s food supply generally is dependent on the free-flowing border.”
Total sales at Primark—which accounts for about half of the group’s revenue and profit—were 4% ahead of last year, at both constant currency and actual exchange rates, and with a higher operating profit margin, profit was well ahead. Sales growth was driven by increased retail selling space partially offset by a modest decline in like-for-like sales.
The UK performed well, with Primark’s share of the total clothing market increasing significantly. Sales were 1% ahead of last year for the period, in a market which declined year-on-year.
Sales in the Eurozone were 5% ahead of last year at constant currency. Sales growth was especially strong again in France, Belgium and Italy, and performance strengthened in Primark’s second largest market, Spain.
The US continues to show strong performance, with very strong trading at the Brooklyn store, which opened in July last year.
Operating profit margin in the period increased, with purchases having been contracted at a weaker US dollar exchange rate than last year, and through better buying and tight stock management. Operating profit for the full year is in line with expectations.
Primark’s retail selling space increased by 0.3 million sq ft since the financial year end and, at 5 January 2019, 364 stores were trading from 15.1 million sq ft which compared to 14.2 million sq ft a year ago. Four new stores were opened in the period: Seville and Almeria in Spain, Toulouse in France and a city centre store in Berlin, Germany.
Primark plans to open another 0.9 million sq ft of retail space this year, in New Jersey, Spain, Birmingham and Slovenia.
Over 2018-2019 the group generated revenue of £15.6 billion. Group revenue from continuing operations for the 16 weeks ended 5 January 2019 was 2% ahead of the same period last year at constant currency. Sterling has strengthened marginally against most of the group’s major trading currencies, other than the US dollar, and as a result sales from continuing operations at actual exchange rates were 1% ahead.