Associated British Foods raised its full-year profit outlook on Tuesday for the second time in four months, driven by resilient trading at its Primark fashion business and a strong performance from its food operations in its latest quarter.
Shares in the group were up 5 percent in morning trading, extending 2023 gains to 34 percent after it forecast its year to Sept. 16 adjusted operating profit would be “slightly better” than its previous expectation of “moderately ahead” of 2021/22′s £1.435 billion ($1.8 billion).
Britain’s consumers have shown resilience in 2023 despite high inflation and rising borrowing costs. However, industry data has shown spending lost pace in August.
Last month, Primark rivals Next and Marks & Spencer both reported strong trading and upgraded their profit outlooks.
AB Foods said Primark’s sales for the 2022/23 year were expected to be around £9 billion — 15 percent ahead of 2021/22, with like-for-like sales up 9 percent.
Primark’s growth has been driven by selective price increases, well received ranges and strongly performing new stores. Eight store openings in the fourth quarter will take the total to 432.
AB Foods CEO George Weston said he expected most of Primark’s prices to be stable in its 2023/24 year.
The group said its grocery business, which includes Twinings tea, Jordans cereals and Ovaltine drinks, traded slightly ahead of expectations in its fourth quarter.
For the new financial year the group forecast Primark’s operating profit margin would “recover strongly” from the around 8 percent expected in 2022/23 — an outcome held back by higher-than-expected theft from stores across the estate and restructuring costs in Germany.
It also forecast a “substantial improvement” in profitability at its sugar business.
“Both those mean that we should be looking to a pretty decent improvement in profits next year for the group,” finance chief Eoin Tonge told Reuters.
By James Davey; Editors: Paul Sandle and Jason Neely
Primark Under Pressure From Inflation and Weak Sterling
Profit is under pressure at budget fashion chain Primark as the retailer struggles with a weaker pound and the effort to keep clothing cheap for cash-strapped shoppers.