PRIMARK'S UK business has toasted a "particularly strong" summer of trading as the budget chain continues to defy the uncertain economic climate.
The retailer, which has 242 stores across Europe, is expected to see revenues rise by 17% over its current financial year, which ends on Saturday.
The figure – excluding currency movements – includes “buoyant“ trading in continental Europe, even though much of the region is mired in a debt crisis.
Associated British Foods, which owns Primark as well as household brands Kingsmill, Ryvita and Twinings, said profits for the second half of the financial period should be “substantially ahead“ of last year.
It said its grocery customers continued to seek value through promotions and price but warned that higher wheat prices meant margins at its Kingsmill bread division were likely to come under further pressure.
At Primark, AB Foods estimated when excluding the addition of 19 new stores over the year sales will be 3% higher in the financial period, with the performance of recently opened shops also exceeding expectations.
The company will boost its presence on London’s Oxford Street later this month with a new four-floor outlet. It will also have 28 outlets in Spain after opening five new stores in the debt-laden country this summer.
Primark has been the star performer within AB Foods over recent years as it has ridden the boom in demand for budget clothing on the high street.
Primark’s margins benefited over the summer from lower costs linked to the material falling back in cotton prices at the turn of the year.
Shore Capital analyst Darren Shirley, who continues to forecast group profits of £970m for this financial year, today described Primark as “possibly the most potent retail format in the UK and increasingly Europe“.
Despite Primark’s progress, shares in AB Foods fell 2% after continued poor trading in its Australian meat business prompted a £100m write-down on the value of property, plant and equipment.
Elsewhere, Twinings Ovaltine was AB Foods’ most profitable business as its tea ranges remained popular. Ovaltine enjoyed strong growth in Thailand.
However, the market has remained “intensively competitive“ for Kingsmill-maker Allied Bakeries, with promotional activity impacting on margins.