Primark lifts sales for upbeat AB Foods

Associated British Foods is seeing signs of improving consumer confidence in Britain, with a strong performance from its Primark discount clothing chain helping to lift third-quarter sales by 8 per cent.

While many British retailers have struggled as consumers fret over job security and squeezed incomes, Primark’s low prices are pulling in cost-conscious customers who are at last beginning to loosen their purse strings.

The performance of Primark, which trades as Penneys in Ireland, supports recent British retail data showing a steady rise in sales, while a separate study suggested that consumer morale reached a two-year high.

"I think the UK is pointing in the right direction," AB Foods finance director John Bason said today. "I think the UK consumer remains careful; but for the right things, the UK consumer is spending. Our view is that it's not getting worse."

Sales at Primark, which has more than 250 stores in Britain and Europe and generates about a third of the group's profit, grew 20 per cent in the 16 weeks to June 22nd and are up 22 per cent in the year to date. AB Foods shares rose 6 per cent on the news.

As expected, Primark’s third-quarter sales growth was slower than in the first half of its financial year, when sales rose 24 per cent including new stores and by 7 per cent on a like-for-like basis. It’s third quarter was hit by freezing weather in March and April, which kept shoppers off the streets.

AB Foods, which will step up Primark's store openings in the new financial year, including its first in France, said that underlying sales had been "subdued" by cold weather in the period but had recovered "markedly" since then.

Third-quarter revenue at the group’s grocery division, which includes the Twinings, Ryvita and Ovaltine brands, rose 7 per cent. However, its sugar business saw revenues fall by 15 per cent because of delivery timings in the UK and shipments of Zambian exports to the EU coming after the end of the quarter.

AB Foods said that it remains on track for adjusted full-year earnings per share (EPS) in line with expectations.

Shares in AB Foods, which have risen 41 per cent in a year, were up 7.4 per cent at £19.49 this morning. Analysts expect the company to post annual earnings per share of 96.41 pence, up 10.6 per cent on 2012.

Reuters