The parent firm of Primark, which trades as Penneys in Ireland, has revealed a jump in profits and sales as shoppers continued to shop “enthusiastically” at the fashion chain despite price rises and budget pressures.
Associated British Foods (AB Foods) which also runs large grocery, ingredients and agriculture operations, said the backdrop is still “challenging” for consumers but stressed that it has seen inflationary pressure ease over the past year.
It said company profits jumped by a quarter to £1.34 billion (€1.54 billion) over the year to September 16th, compared with a year earlier, as it was boosted by Primark.
AB Foods added that profit from the fashion retailer, which has 432 shops globally, is set to see profits rise further as it benefits from lower raw material and freight costs.
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During the past year, Primark implemented “selective price increases” for shoppers after reporting a spike in costs to make products and operate shops.
On Tuesday, the group revealed that Primark sales surpassed expectations from last year as demand increased across its markets despite the increased pricing.
Primark sales grew by 15 per cent to £9 billion for the year, with 11 per cent growth in the UK.
Sales increased in both halves of the year, rising by 17 per cent in the first half to £4.2 billion against the same period in the prior year, while they climbed 14 per cent to £4.8 billion in the second half.
The company noted there was “very poor weather” in Ireland in July, but said it “generally traded well” with its core product ranges “remaining in robust demand and partially offsetting inevitable volatility in sales more dependent on fashion and season”.
Primark rolled out a new website to its 16 markets, which saw “positive customer reaction and strong traffic uplift in all trading markets”, led by Britain and Ireland which were the first two countries to move on to the new platform.
AB Foods chief executive George Weston said trading at Primark was “excellent under the circumstances”.
“At the beginning of the year we implemented selective price increases partially to protect profitability, on the grounds that the significant input cost inflation was temporary,” he said.
“That careful pricing delivered as intended, with customers continuing to shop with us enthusiastically.
“Although consumer demand remains uncertain, Primark is as well placed as it has ever been.
“With Primark margin now moving back to its historic levels, we view the future for this business with confidence.”
AB Foods said it expects further growth in Primark’s sales next year driven by new selling space and “modest levels” of like-for-like sales growth.
“Lower material costs and lower freight costs should result in a substantial recovery in gross margin and overall we expect Primark adjusted operating profit margin to recover strongly,” the group said.
“At this early stage we believe that the adjusted operating profit margin will be above 10 per cent with further improvement dependent on levels of consumer demand.”
As a whole, AB Foods group revenue increased by 16 per cent to £19.7 billion for the year, as it was also boosted by higher pricing in other areas.
