Strong growth at its Primark fashion stores helped boost parent Associated British Foods which today said it expects a substantial rise in half-year earnings and very good progress for the full year.
The London-based foods and retail group said trading at Primark, which operates under the Penneys brand in Ireland, was ahead of its expectations, while it was also boosted by a recovery at its grocery brands like Twinings tea and a strong performance at its Silver Spoon sugar business.
Its 196-strong Primark discount chain, which earns around a third of the group's profits, was driven by an 8 per cent rise in like-for-like sales and an exceptionally strong performance from its relatively new 14 Spanish stores.
"Primark's momentum is improving, it's an amazing performance especially since January and February were hit by terrible weather in the UK and the current retail environment," said finance director John Bason in an interview after a half year trading update.
The group, 55 per cent owned by the family of its chief executive George Weston, has recently been investing heavily in many of its operations such as Primark and sugar, and analysts said this spending is starting to boost returns.
Analyst Graham Jones at house broker Panmure Gordon expects a 13.8 per cent rise in half-year earnings to 28.7 pence and full year earnings to increase 10 per cent to 63.5p.
"We believe ABF offers an attractive combination of defensive earnings and strong profits growth," he said.
Jones had forecast Primark's like-for-like sales grew 7 per cent in its first quarter, so the estimated 8 per cent rise for the half year to February 27th suggests a further acceleration.
AB Foods' Bason said the chain continued to gain from its value for money clothing and at the fashion end was helped by the trend towards nautical designs and more lace.
Five new Primarks were opened in the first half and it expects to unveil a further six in its second half -- three each in Britain and Spain. In addition, it has bought 10 Bhs stores in Britain to be refitted and opened in its next financial year.
Mr Bason added its grocery division was benefiting from a better economic environment, while sugar saw better UK yields, and good performances in China and Africa.
The group which also markets Ovaltine drinks, Kingsmill bread and Mazola vegetable oil was giving its routine trading update ahead of its half-year end on February 27th and ahead of its half-year results on April 20th.
Reuters