Penneys forecasts substantial growth

DISCOUNT FASHION chain Penneys continues to beat retail trends and its owner is forecasting “substantial growth” over the coming six months, as the retailer shrugs off the impact of weaker consumer demand and rising cotton prices.

Associated British Foods (ABF) yesterday reported an 11 per cent increase in group half-year revenues, up to £5.8 billion (€7 billion) for the six months to March 3rd, as its pre-tax profits advanced by 3 per cent to £329 million.

According to George Weston, chief executive of ABF, the growth was due to both AB Sugar and Primark (Penneys), which both “performed strongly, demonstrating continuing momentum”.

According to ABF, Primark is “now returning to good profit growth” and it noted that Christmas was “particularly strong” for the chain, and that it’s looking with “confidence” to its spring/summer range.

In retail, revenues jumped by 15 per cent, up to £1.6 billion from £1.4 billion for the same period in 2011. However, rising costs saw operating profit increase by just 2 per cent, up to £154 million.

Margins are down to 9.5 per cent from 10.7 per cent last year, due to the expected rise in cotton prices. However, the company noted that there was some improvement in the second half, as cotton prices fell back.

Jack Gorman, an analyst with Davy Stockbrokers, noted that while the profit was small, it nonetheless marked “a significant milestone given the raw material headwinds in the period”. He forecasts that profits growth for the second half of the year “will accelerate”.

Primark continued to expand its hold on the retail market over the past six months. In Ireland, it kept its number of stores level at 38, but elsewhere its retail space jumped by 14 per cent, as it added 19 stores to bring its total up to 233 outlets worlwide.

While there are no planned openings for Ireland in 2012, it intends to refurbish and expand its Mary Street store in Dublin’s city centre next winter.