Primark is ABF’s jewel in the crown, chain gets it right with openings as new stores leap into its top 20 list
By Yasameen Noorian

Analysts and investors may have had much to pore over on Tuesday as Associated British Foods’ (ABF) released its latest half-year results, but for …

Apr 21, 2015
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Analysts and investors may have had much to pore over on Tuesday as Associated British Foods’ (ABF) released its latest half-year results, but for fashion industry, it was all about Primark. So while profits were down, did Primark deliver? Of course it did. As ever, the value fashion chain had a good half.

CEO George Weston on Tuesday cited “significant progress made in operating profit by Primark” for the group’s “sound trading” in the period ended February 28.

Total sales at Primark, which contributes around a third of group revenue, rose a sturdy 12% in the period to £2.55bn, boosted by a weakening euro against sterling, as currency-neutral sales were 15% higher.

At February 28, Primark operated 287 stores and the chain’s performance was driven by “significant expansion of selling space (up 11% year-on-year) and superior trading” by the stores opened in the last 12 months, noting “very high sales densities” in those units.

All of which suggests more great results ahead because Primark is obviously getting it right in its choice of new store locations. This is especially so given that plans for Primark’s entry into the north-eastern US market “are well advanced” for a late 2015 debut while European expansion and sales growth continues.

ABF said several of the newer stores “now regularly feature in Primark’s top 20 stores by annualised sales” including Berlin-Alexanderplatz, Cardiff, Stuttgart, Cologne, Marseille and all three stores in Paris.

However, comp sales, flat on last year, were held back by unseasonably warm weather across northern Europe last autumn and the impact of opening new stores in the Netherlands and Germany hitting the performances in existing stores in the region.

“This is consistent with the normal trading pattern that we have seen in the early days of Primark’s expansion in new countries. If the Netherlands and Germany are excluded from the comparison, like-for-like growth for the group would have been 3% in the first half,” it noted.

But same-store sales over the important Christmas trading period “were strong”, it said, delivering positive comp performances with Spain, Portugal and Ireland singled out as performing “very strongly”.

Operating profit margin slipped to 12.6% from 12.1% due to a higher level of mark-downs with exchanged rates also having an effect on sourcing costs.

ABF also said: “The impact of sustained US dollar strength will increase our costs for the autumn/winter season and will be seen in the fourth quarter of this financial year and into the following financial year. We will not allow currency changes to impact our model of providing up-to-the-minute fashion at the best value to our customers in each of our markets.”

Those wider results for ABF showed net profit fell to £143m/18.1 pence a share from £341m/43.2 pence; adjusted pre-tax profit fell 4% to 46.1 pence a share from 45.8 pence a year ago; adjusted operating profit fell 5%, and by 2% at constant currency; while H1 revenue increased 1%, and by 3% currency neutral.


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