Bargain hunters at discount store Primark shrugged off the distractions of the 2012 Olympic Games and went on a spending spree over the summer.
Primark’s owner Associated British Foods is set for a giant leap in full-year earnings thanks to robust sales growth at the commercial property retailer.
ABF believes annual earnings will be “substantially” ahead as the fashion store’s formula of cheap chic resists the economic gloom.
Its flagship Oxford Street store in central London saw a decline in the two weeks of the Olympics Games, but other commercial properties made up for this.
ABF’s finance director John Bason said: “June, July and August have been great for Primark in the UK. Trading has ticked up and there is no doubt Primark is thriving and gaining market share.”
Primark, which sell cable jumpers for £12 and chinos for £10, expects yearly sales to rise 15 per cent.
Primark now has 242 commercial property stores and 8.2 million sq. ft. of selling space after opening 19 stores this year with 0.9 million sq. ft. of space. Stripping out new store openings like-for-like sales are set to increase by three per cent for the full year, ahead of the first half’s two per cent rise.
Primark’s results come at a time when many stores, such as Marks & Spencer, are struggling as consumers’ incomes are squeezed.
ABF, which also sells Twinnings tea and Silver Spoon sugar, said earnings at its sugar business for the full year will be “considerably higher” than last year due to the benefit of rising African and European revenues.
Darren Shirley, analyst at Shore Capital, who is projecting group profits of £970m for this financial year, described the company as “possibly the most potential retail format in the UK, increasingly, Europe”.
Graham Jones, analyst at house broker Panmure Gordon forecasts earnings for the full year to September 2012 will rise 15.6 per cent to 85.5p a share and he upgraded his Primark profit forecast.
He added: “ABF will deliver impressive earnings growth in 2012, driven by a significant rise in sugar profits, but it is Primark’s long-term growth potential in continental Europe that most excites us”.
The company’s margins benefited over the summer from lower costs connected to the material falling back in cotton prices at the turn of the year.
ABF, which also owns household brands Ryvita and Kingsmill, said its grocery customers continue to find value through promotions and price, however warned that recently higher wheat prices meant margins at its Kingsmill bread division are likely to come under further pressure.
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