ABF raises full year profit forecast despite weaker than expected sales at Primark
Associated British Foods has raised its full year profit outlook after weaker than expected fourth quarter sales at its Primark fashion chain were offset by strong profit margins.
In a pre-close trading update for the full year to 18 September, the company said adjusted operating profit across the group would come in ahead of last year.
ABF said trading at Primark varied considerably in its fourth quarter, but improved from a weekly decline in like-for-like sales of 24% at the start of the period to a drop of 10% in recent weeks. Over the fourth quarter as a whole, the company expects Primark’s like-for-like sales to be 17% lower than the same period two years ago.
In the UK, Primark sales were affected in late June and early July by a rapid increase in the number of people required to self-isolate due to Covid-19 track and trace alerts. However, like-for-like sales showed a consistent improvement through the period from a fall of 24% in the first four weeks to a decline of 8% in the last four weeks of the quarter.
In continental Europe, like-for-like sales were impacted by the performance of stores in Spain and Portugal where the decline of foreign tourism caused by restrictions in international travel reduced footfall.
Meanwhile, US like-for-like sales were 3% ahead of the same period two years ago.
Looking ahead to Primark’s next financial year, ABF said: “Operating profit margin will continue to benefit from lower store labour and operating costs. Our forecast is for the effect on margin of supply chain and raw material inflation to be broadly mitigated by the transaction currency gain arising from the weaker US dollar.”
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