Associated British Foods said an “outstanding” performance from the Primark budget clothing chain drove business ahead of its expectations in the financial year to date, boosting the shares the most in 18 months. Primark revenue surged 25 per cent from a year earlier in the 16 weeks ended January 5th, the London-based company said today in a statement.
A 12 per cent increase in the sugar unit’s sales also exceeded group revenue growth of 10 per cent. Primark opened 14 new stores during the period, including its first two in Austria, while the chain’s operating profit margins widened as cotton prices fell. Sales growth was fuelled by the retailer’s UK stores, with British shoppers having been more willing to spend on affordable apparel over the holiday than they were in 2011, finance director John Bason said in an interview.
‘Onesies’
Popular items included holiday sweaters and all-in-one jumpsuits, also known as “onesies”, he said. Primark’s sales were “stunning” and “well ahead of expectations”, Panmure Gordon analyst Graham Jones said in a note. Sales in Primark stores open at least a year rose 9 per cent, Mr Jones said, above his earlier estimate of 5 per cent. AB Foods rose as much as 4.8 per cent to 1,630 pence in London trading, the steepest intraday gain since July 14th.
The shares traded at 1,627 pence at 9am, the highest price since at least January 1986. They were among the five biggest gains today in the UK benchmark FTSE 100 Index.
Sugar
Mr Bason said he was “extremely confident” that Primark’s performance this year will offset declining profits in sugar. “Disposable incomes got squeezed in 2011, but there was not a squeeze towards the end of 2012,” the executive said.
“We have got the fashions right and more and more people are recognising that. Onesies were blowing the lights out.”
Sales at the sugar unit, the biggest contributor to profit, were boosted by “marginally” higher prices in the UK. Sugar earnings will fall this year because of lower output, higher beet costs and a weaker euro, the company said.
Nomura analyst Guillaume Delmas estimated the unit’s profit may drop 12 per cent to £451 million ($722 million) in a January 14th report.
AB Foods forecast UK sugar production of 1.1 million tons this year. – Bloomberg
