Primark owner’s shares hit by new profit forecast

CONGLOMERATE: Food to fashion group holds full-year outlook as sugar division is squeezed

Shares in Primark owner Associated British Foods took a hit yesterday despite the group budget fashion chain being on course to deliver higher than expected annual profits.

In a trading update, Associated British Foods said it expected Primark’s bottom line to grow thanks to higher operating margins.

“Stock has been tightly managed and markdowns, although higher than the very low level achieved last year, will be better than previously expected and, as a result, the profit from Primark will now be higher than expected,” AB Foods said.

It also expects to feel the benefits of a weaker US dollar on its purchases. However, the improvement is not enough to offset a decline in profits at the group’s sugar division, which is being knocked by low EU prices.

The situation saw AB Foods hold its full-year outlook unchanged, just weeks after signalling it expected profit growth to ramp up in the second half of the year.

Shares fell by almost 5% in morning trading following the update.

Overall, the group logged a 2% rise in like-for-like revenue over the 40 weeks to June 23, which rose to 3% when stripped of currency effects. Third-quarter sales were up 4%. The group’s year-to-date sales were helped by a 7% rise in Primark revenues, at actual exchange rates, thanks to a larger store footprint.

Shares closed down 113p at 2,604.00p.

Shop talk: Primark is on track to deliver higher than expected profits.