Primark suffers big fall in sales growth

BUDGET FASHION chain Primark has seen UK sales growth more than halve following an unusually warm October and the ‘Beast from the East’ snowfall in the final week of its first half.

The retailer’s UK like-for-like sales rose 3 per cent in the six months to March 3 – down sharply on the 10 per cent growth seen in the previous year.

Primark’s owner Associated British Foods said the retailer’s UK performance was “remarkable” amid difficult conditions and said profit growth would ramp up in the second half.

Overall like-for-like sales at Primark fell 1.5 per cent in the half-year as the impact from the snow was felt more acutely elsewhere in Europe, in particular northern Europe.

Primark’s underlying operating profits rose 4 per cent to £341m on a constant currency basis, despite the weaker sales growth and a knock to its profit margins from the weak pound.

ABF’s chief executive George Weston, whose family owns the majority of ABF shares, said: “Our UK performance was remarkable in the circumstances and delivered a strong increase in our share of the total clothing market.

“Looking ahead we expect this profit growth to accelerate with the continuation of our retail selling space expansion and an improvement in margin following the recent strengthening of sterling against the US dollar.”

Primark said group sales fell significantly during the warm October weather, while the first week of March was “challenging” due to the freezing temperatures across northern Europe.

It said sales rose 1 per cent in the 15 weeks to February 24, which it said was encouraging.

The group opened another seven Primark stores in the first half.

Across the wider group, which also owns Twinings tea and Kingsmill bread, underlying halfyear pre-tax profits rose 1 per cent to £628m as an earnings drop at its sugar arm weighed on results.

Bottom line pre-tax profits slumped 30 per cent to £603m after figures from a year earlier were boosted by a £255m gain from the sale of its US herbs and spices business and south China cane sugar operations.

Grocery underlying earnings rose 9 per cent to £159m at constant exchange rates in the first half.

But its sugar business suffered a 24 per cent plunge in underlying operating profits to £90m due to lower prices across the EU.

George Salmon, equity analyst at Hargreaves Lansdown, said the weather had not done Primark any favours.

“However, that bout of unseasonably cold weather is now behind us, and in any case investors know being open to the elements is just part and parcel of the retail game,” he said.

“What’s impressive in these results is management’s assertion that profitability in the all-important retail division will rise in the second half. Part of this is due to the benefit of a weaker dollar, but Primark has managed its stock well and improved its buying positions too.”