Penneys owner reports 10% profits rise

Clothing retailer Primark, which trades as Penneys in the Republic, has reported a 10 per cent rise in profit to £122 million as it attracted shoppers despite the economic slowdown.

Primark's owner Associated British Foods (ABF) recorded an adjusted pretax profit of £275 million for the half-year to the end of February, beating analysts’ expectations.

ABF does not split-out the performance of its 37 Pennys outlets in the Republic from the Primark brand.

The London-based ABF group said it expects a recovery in second-half operating profits and restated its flat annual earnings forecast for its year to September 2009.

"Business is as a whole affected by the economic conditions but our good performances are offsetting more difficult areas. We are not seeing any green shoots, but we had not expected to see any," chief executive George Weston said in an interview. His family owns 55 per cent of the group.

However, Mr Weston warned that Primark's operating margins may fall further in its second-half to September 2009 after sliding in its first-half to 11.5 per cent from 12.3 due to extra costs from a newly-opened UK distribution centre in Eastern England.

"Primark's operating margins fell in the first half mainly due to our new distribution centre and have potential in the second half to come off further," he said.

He said that expensive forward contracts taken out late last year just before the vegetable oil market started to fall were now expiring at its US Mazola business, and this would help the group's second-half performance.

Overall group profit slipped as consumers switched to cheaper food products hitting its bread and tea businesses, and due to the expensive forward buying of US corn oil.

The group's half-year dividend rose 2 per cent to 6.9p.

ABF plans to open seven new Primark stores before the end of September.