Penneys owner Associated British Foods said underlying sales growth slowed at its Primark clothing business in the Christmas quarter, reflecting unseasonal weather at the start of the period.
The group also said on Tuesday it was monitoring the situation in the Red Sea but does not expect any significant disruption to its supply chain for now.
AB Foods said like-for-like sales at Primark, which trades as Penneys in Ireland, rose 2.1 per cent in the 16 weeks to January 6th, its fiscal first quarter, a slowdown from growth of 8 per cent in the previous quarter.
Primark's total sales were up 7.9 per cent over the period, which the group said was marked by "a slow start given the unseasonal warm weather, and strong Christmas trading."
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AB Foods said it now felt more confident in Primark delivering an improved adjusted operating margin in the 2023/24 financial year, driven by a further improvement in product gross margin.
"This should insulate us well against potential additional costs of supply due to the disruption in the Red Sea should they arise," it said.
Attacks by the Iran-allied Houthi militia on ships in and around the Red Sea since November have slowed trade between Asia and Europe.
Clothing retailer Next and discounter Pepco Group have already warned that a prolonged issue in the Red Sea region could impact supply in the coming months. Marks & Spencer has said the disruption will cause some slight delay in clothing and homewares deliveries.
AB Foods, which also owns major sugar, grocery, agriculture and ingredients businesses, kept its forecast for a year of "meaningful progress" in both profitability and cash generation.
It said the profitability improvement was being driven by a recovery in Primark's margin, a marked improvement in British Sugar profitability and by reduced losses at Vivergo.
It also felt more confident in the continued strong performance of both its US-focused brands in grocery and of AB Mauri in ingredients.
In the first quarter, sales in the grocery business, which includes Twinings tea, Jordans cereals, Kingsmill bread and Ovaltine drinks, rose 5.4 per cent. - Reuters
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