Weak dollar to boost Primark’s earnings
A FALLING US dollar and measures including better buying have set Primark on course for higher profits as expansion continues at home and abroad.
The fashion chain, which trades from about 350 stores, had a “strong increase” in its UK clothing market share after sales grew 8 per cent in the 24 weeks to March 3 compared with the year before.
With New Look and H&M struggling, sales at Primark’s domestic stores were up 4 per cent, although group like-forlike takings fell 1 per cent after warm weather last October hit demand for its autumn and winter ranges.
It enjoyed record sales in the week before Christmas, while early trading of its new spring/summer range has been “encouraging”.
Primark, which sources most goods in dollars from the Far East, said: “We expect an acceleration in profit growth in the second half as a result of an improvement in margin, driven by better buying and some benefit of the weakness of the US dollar on purchases.”
It opened seven new stores over the six-month period including Charlton and Staines in the UK, while expansion in America is planned with the opening of a ninth store, in Brooklyn.
Primark’s owner, FTSE 100 group Associated British Foods, also expects first-half operating profit from its grocery business to be well ahead of last year, driven by Twinings Ovaltine. Although it flagged weaker revenue and profit at its sugar business, due to lower EU prices, shares rose 81p to 2726p.
George Salmon at Hargreaves Lansdown said: “It looks like Primark’s spring/summer lines are hitting the right notes, although investors might wonder if its warmer weather clothes will continue to fly off the shelves as the blizzards kick off.
“Longer term, we think there’s plenty to like about Primark. It’s successfully established its value-orientated business model throughout the UK and western Europe, and is upbeat about early trading in the US. If it conquers the vast North American apparel market, the rewards would be huge.”